Ringgit Has Best Month Since September as Easing Boosts Inflows

Malaysia’s ringgit rallied this month by the most since September and government bonds advanced on speculation monetary easing in Japan and the U.S. spurred inflows to the nation’s assets.

Bank of Japan Governor Haruhiko Kuroda announced on April 4 a plan to buy 7.5 trillion yen ($77 billion) of debt a month, almost as much as the Federal Reserve’s $85 billion of purchases. Malaysia’s overnight policy rate is 3 percent, compared with 0.1 percent in Japan and 0.25 percent in the U.S. The FTSE Bursa Malaysia KLCI Index of shares was poised for a record close, while the yield on benchmark five-year government bonds touched an eight-month low of 3.16 percent on April 15.

“The search for higher yields has benefited the ringgit,” said Choong Yin Pheng, a senior manager for fixed income and economic research at Hong Leong Bank Bhd. in Kuala Lumpur. “We still enjoy a positive interest-rate differential.”

The ringgit strengthened 1.8 percent this month to 3.0372 per dollar as of 4:30 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It is the best performer among Asia’s 11 most-traded currencies in April. The ringgit retreated 0.2 percent today.

Malaysia will hold general elections on May 5, with the ruling Barisan Nasional coalition attempting to extend its unbroken 55-year run in power since independence. The ringgit, which weakened 1.2 percent against the dollar in the first quarter, has benefited since Prime Minister Najib Razak dissolved parliament on April 3, removing uncertainty as to the timing of elections, Choong said.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, climbed 151 basis points in April and 39 basis points today to 8.34 percent.

The yield on the 3.26 percent bonds due March 2018 dropped seven basis points, or 0.07 percentage point, this month to 3.15 percent, according to data compiled by Bloomberg. The rate fell one basis point today.

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