Ringgit Halts Losses Deemed Excessive as Zeti Warns on Weakness

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Malaysia’s ringgit rose the most in almost four weeks as a technical indicator signaled losses that drove it to a nine-year low were excessive.

The weakness doesn’t reflect economic fundamentals and the depreciation should be temporary, central bank Governor Zeti Akhtar Aziz said in an e-mailed interview Monday as the ringgit approached 3.8 per dollar, the level it was pegged at during the 1997-98 Asian financial crisis. It climbed 0.5 percent to 3.7525 in Kuala Lumpur Tuesday.

Prospects that the Federal Reserve will raise interest rates this year for the first time since 2006 have weakened emerging-market currencies in the past month. The ringgit is vulnerable to U.S. monetary tightening because of the relatively high foreign ownership of the nation’s bonds, while the 45 percent drop in Brent crude prices from 2014’s peak is weighing on the country’s oil-export revenue.

“The ringgit’s move is just a consolidation from yesterday’s losses,” said Choong Yin Pheng, senior manager for bonds and economic research at Hong Leong Bank Bhd. in Kuala Lumpur. “If there are no positive factors in the local market, the chances of the ringgit hitting 3.80 are there.”

The dollar’s 14-day relative-strength index against the ringgit rose to 75 on Monday, above the 70 level that suggested to some traders the greenback was poised to fall. The Bloomberg US Dollar Spot Index was little changed after dropping 1 percent in the previous session.

Malaysia’s currency depreciated 2.3 percent in the past three days and declined to 3.7743 on Monday, the lowest since January 2006. The peg was imposed as part of capital controls in 1998 after the ringgit depreciated 35 percent the previous year in the wake of a devaluation in the Thai baht. It was scrapped in July 2005.

The currency is expected to resume trading at levels that reflect the nation’s fundamentals when uncertainty affecting market sentiment subsides, Zeti said.

Government bonds rose. The five-year yield fell two basis points to 3.7 percent. The 10-year yield declined three basis points to 4.13 percent, after climbing 28 basis points in the past 11 days.

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