Ringgit Forwards Strengthen on Speculation Fed to Keep Stimulus

Malaysian ringgit forwards climbed toward a one-month high as speculation the Federal Reserve will maintain its monetary stimulus bolstered demand for emerging-market assets. Government bonds rose.

The Fed should press on with $85 billion in monthly bond buying while tracking its possible costs and risks, Federal Reserve Vice Chairman Janet Yellen said yesterday, echoing a similar view by Chairman Ben S. Bernanke last week. Malaysia’s central bank will keep the benchmark interest rate at 3 percent on March 7, according to all 19 economists surveyed by Bloomberg.

“The market is more comfortable with the idea that quantitative easing will still be around for a while,” said Andy Ji, a foreign-exchange strategist in Singapore at Commonwealth Bank of Australia. “It’s more the external factors which are driving the market.”

Twelve-month non-deliverable forwards rose 0.3 percent to 3.1599 per dollar as of 4:21 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. They touched 3.1581, near the 3.1366 level reached on March 1 that was the strongest since Jan. 30.

The contracts to fix an exchange rate in a year’s time were at a 1.9 percent discount to the spot rate, which strengthened 0.2 percent to 3.0998. Non-deliverable forwards are settled in dollars. One-month implied volatility in the ringgit, a measure of expected moves in exchange rates used to price options, fell seven basis points, or 0.07 percentage point, to 6.84 percent.

Malaysia’s ringgit may strengthen beyond 3 per dollar, a level not seen since March 2012, by the end of the year, led by a recovery in the Chinese and U.S. economies, Lee Kok Kwan, deputy chief executive officer at CIMB Group Holdings Bhd. in Kuala Lumpur, said today.

Schroder Investment Management Ltd. has raised ownership of Malaysian sovereign bonds as narrowing swings in yields signal reduced potential for losses, Rajeev De Mello, the Singapore-based head of fixed-income assets, said.

The yield on the 4.16 percent notes due July 2021 dropped was steady at 3.46 percent, according to data compiled by Bloomberg.

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