Ringgit Forwards Advance to an 11-Week High on Election Optimism

Malaysian ringgit forwards jumped to an 11-week high on optimism pro-growth policies will gain momentum following national elections due in the coming weeks, attracting global investment. Government bonds were steady.

The Election Commission will meet tomorrow to set a date for the vote, spokesman Sabri Said said today, after Prime Minister Najib Razak dissolved parliament on April 3. Net inflows of foreign capital into Malaysian stocks reached a record 4.8 billion ringgit ($1.6 billion) in March, according to a Credit Suisse Group AG research note. The ringgit’s rally was fueled by bets Japan’s stimulus measures will drive flows into emerging markets, according to Hong Leong Bank Bhd.

“Portfolio flows have become more confident in coming back in,” said Sacha Tihanyi, a senior foreign-exchange strategist at Scotiabank in Hong Kong. “Setting the polling date is a greater movement toward that day of political decision and, hopefully, political certainty.”

Twelve-month non-deliverable forwards gained 0.7 percent to 3.0951 per dollar as of 4:56 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. They touched 3.0939 earlier, the strongest since Jan. 23. Non-deliverable forwards are settled in dollars. The contracts to fix the exchange rate in a year were at a 1.9 percent discount to the spot rate, which rose 0.7 percent to 3.0368 and reached an 11-week high of 3.0365.

Bank of Japan

The Nikkei 225 Stock Average climbed to its strongest in 4 1/2 years today after the Bank of Japan said April 4 that it will increase its monthly bond purchases to 7.5 trillion yen ($75.4 billion). Societe Generale SA recommends buying the ringgit in the 3.04 to 3.05 range in the short term.

“People are still expecting inflows from the BOJ’s easing,” said Choong Yin Pheng, senior manager for fixed income and economic research at Hong Leong Bank in Kuala Lumpur. “There’ll be more liquidity in the system, and emerging Asia will be one of the more attractive destinations for funds.”

One-month implied volatility in the ringgit, a measure of expected moves in the exchange rate used to price options, fell 27 basis points, or 0.27 percentage point, to 6.56 percent.

The yield on the 3.26 percent sovereign notes due March 2018 was little changed at 3.19 percent, according to data compiled by Bloomberg.

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