Ringgit Forwards Strengthen for Fifth Day After Cyprus Agreement

Malaysian ringgit forwards advanced for a fifth day after Cyprus reached a deal on an international bailout, bolstering demand for riskier assets. Government bonds were little changed.

The agreement, a step toward staving off the threat of a Cypriot default and a disorderly exit from the euro, was approved by finance ministers from the 17-nation euro area today in Brussels. Malaysian inflation will not exceed 2 percent this year due to subsidies that help cap prices of essential goods such as rice, sugar and fuel, Deputy Finance Minister Awang Adek Hussin was quoted as saying in a Bernama news agency report yesterday. Consumer prices rose 1.6 percent in 2012.

“It’s all about the Cyprus deal, and that news is lifting the market,” said Sean Yokota, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore. “People are waiting for the details.”

Twelve-month non-deliverable forwards rose 0.4 percent to 3.1572 per dollar as of 4:05 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. They have gained 1.1 percent since March 18. Non-deliverable forwards are settled in dollars.

The contracts to fix an exchange rate in a year’s time were at a 1.9 percent discount to the spot rate, which advanced 0.5 percent to 3.0982 per dollar. The Malaysian currency will reach 3.03 per dollar by year-end, after some short-term volatility in the second and third quarters, according to Alliance Bank Malaysia Bhd.

One-month implied volatility in the ringgit, a measure of expected moves in the exchange rate used to price options, fell 15 basis points, or 0.15 percentage point, to 6.94 percent.

The yield on the 3.26 percent sovereign bonds due March 2018 was 3.23 percent, according to data compiled by Bloomberg.

Before it's here, it's on the Bloomberg Terminal.