Ringgit Weakens Most in Two Weeks on General Election Concern

Malaysia’s ringgit dropped the most in more than two weeks as investors focus on an upcoming general election, with polls showing the popularity of Prime Minister Najib Razak declined.

The premier must dissolve parliament by April 28 and is aiming to restore a two-thirds majority for his coalition party lost in 2008. His approval rating dropped to a 16-month low in December, according to a January report from Malaysia’s Merdeka Center for Opinion Research. Parliament will be dissolved “very, very soon,” local news agency Bernama reported last week, citing Najib.

The ringgit depreciated 0.7 percent to 3.0988 per dollar as of 5:05 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. That’s the biggest decline since Jan. 31. It has dropped 2.8 percent over the past month, the second-worst performance among Asia’s 11 most-active currencies.

“General election concern is the ringgit’s biggest driver,” said Azmi Shukri Rahman, a foreign-exchange trader in Kuala Lumpur at CIMB Investment Bank Bhd. “The Malaysian currency could test 3.12 by the end of this week.”

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 12 basis points, or 0.12 percentage point, to 7.3 percent.

A government report on Feb. 20 may show the economy expanded 5.5 percent in the last three months of 2012 compared with 5.2 percent in the preceding quarter, according to the median estimate of economists in a Bloomberg survey.

Najib, who has embarked on economic and government transformation programs since 2010, saw his popularity rating fall to 63 percent in December from 65 percent a month earlier, according to Merdeka.

Government bonds declined. The yield on the 3.418 percent notes maturing in August 2022 increased one basis point to 3.49 percent, according to Bursa Malaysia. The rate has dropped four basis points this year.

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