Ringgit Forwards Advance This Week on Steady Economic Outlook

Malaysian ringgit forwards gained this week on optimism Southeast Asia’s third-largest economy will sustain its growth momentum. Government bonds climbed.

Gross domestic product in 2013 may expand faster than last year’s 5.6 percent pace, driven by investment and domestic consumption, Nor Mohamed Yakcop, a minister in Prime Minister Najib Razak’s department, was quoted as saying in a Feb. 23 Business Times report. Najib, who must dissolve parliament by April 28 to call for polls, has embarked on a 10-year, $444 billion infrastructure spending plan.

“A lot of the Economic Transformation Program projects are going to kick in in a bigger way this year, so that will help to sustain investments,” said Choong Yin Pheng, senior manager for fixed income and economic research at Hong Leong Bank Bhd. in Kuala Lumpur. “In the short-term, people will still very much be focused on the event risk, which is the elections.”

Twelve-month non-deliverable forwards rose 0.2 percent this week to 3.1562 per dollar as of 4:37 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. They fell 0.2 percent today. The contracts to fix an exchange rate in a year’s time were at a 1. 9 percent discount to the spot rate, which gained 0.2 percent in the five-day period to 3.0965. Non-deliverable forwards are settled in dollars.

Malaysia will tighten rules on the daily setting of a key dollar-ringgit reference rate from today in an effort to boost transparency and shield the domestic market against manipulation, according to a draft statement from the Financial Markets Association of Malaysia obtained by Bloomberg yesterday.

One-month implied volatility in the ringgit, a measure of expected moves in exchange rates used to price options, fell 16 basis points, or 0.16 percentage point, this week to 6.95 percent. It declined four basis points today.

The yield on the 3.835 percent notes due August 2015 dropped two basis points from a week ago to 3.02 percent, according to Bursa Malaysia. The rate was little changed today.

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