The ringgit halted a two-day gain after Federal Reserve Chair Janet Yellen said the U.S. is on course to raise interest rates this year, in contrast to Malaysia where borrowing costs will likely stay on hold.
The ringgit dropped 0.8 percent, the biggest decline in six weeks, to 3.6145 a dollar in Kuala Lumpur, after climbing 0.9 percent in the past two days, according to data compiled by Bloomberg. A gauge of the dollar rose to a one-month high.
“The dollar’s certainly bid against both the majors and Asian currencies,” said Divya Devesh, Standard Chartered Plc’s Asia foreign-exchange strategist in Singapore. “We had Yellen who again asserted that a rate hike this year is definitely possible.”
Nomura Holdings Inc. and ING Groep NV both see no change in Bank Negara Malaysia’s 3.25 percent policy rate this year. A report on Friday showed increases in the nation’s consumer prices accelerated to 1.8 percent in April, the same month the government introduced a new goods and services tax.
Malaysia’s inflation quickened from 0.9 percent in March and was below the median estimate in a Bloomberg survey for a 2.2 percent increase. Price pressures could accelerate due to higher crude prices and further pass-through effects from the GST, Nomura economists including Singapore-based Euben Paracuelles wrote in a May 22 report.
The nation’s government bonds retreated, with the 10-year yield advancing one basis point, or 0.01 percentage point, to 3.89 percent, data compiled by Bloomberg show. The central bank is due to announce its final debt sale for May this week.