Ringgit Forwards Halt Three-Day Gain on Election Speculation

Ringgit forwards fell for the first time in four days as speculation Prime Minister Najib Razak will call an early general election increased the risk of holding Malaysian assets. Government bonds were steady.

Parliament will be dissolved “very, very soon,” news agency Bernama reported yesterday, citing Najib. The Southeast Asian nation’s economy expanded 5.5 percent in the last three months of 2012 from 5.2 percent in the preceding quarter, according to the median estimate in a Bloomberg survey before data due on Feb. 20.

“News that the premier may dissolve parliament may have raised the currency risk premium,” said Yeah Kim Leng, chief economist at RAM Holdings Bhd. in Kuala Lumpur. “The ringgit could see volatile movements in the short term, even though its positive fundamentals remain intact.”

Twelve-month non-deliverable forwards weakened 0.1 percent to 3.1532 per dollar as of 4:38 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The contracts to buy or sell the ringgit in a year advanced 0.2 percent this week and were at a 2 percent discount to the spot rate, which climbed 0.2 percent to 3.0915. Non-deliverable forwards are settled in dollars.

One-month implied volatility in the ringgit, a measure of exchange-rate swings used to price options, dropped 10 basis points, or 0.1 percentage point, to 7.25 percent today and declined 35 basis points this week.

The yield on the 3.418 percent government bonds due August 2022 was steady at 3.48 percent, according to Bursa Malaysia. The rate rose one basis point this week.

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