Ringgit Forwards in Longest Run of Losses in a Year; Bonds Fall

Ringgit forwards headed for a fifth weekly decline, the longest run of losses in a year, on speculation the Federal Reserve will pare its monetary stimulus as the U.S. economy recovers. Malaysian government bonds fell.

The currency dropped 4.1 percent in the past month in the spot market, Asia’s second-worst performer after the Indian rupee, as concern the Fed will trim bond purchases spurred outflows from emerging markets. The Southeast Asian nation’s bonds fell before a June 19 report that is forecast to show inflation held at the highest level in a year last month.

Twelve-month non-deliverable forwards dropped 0.2 percent to 3.1761 per dollar this week as of 4:05 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The losing streak is the longest since the five weeks ended June 1, 2012. The contracts were at a 1.9 percent discount to the spot rate, which climbed 0.5 percent to 3.1215, paring its weekly decline to 0.7 percent. Non-deliverable forwards are settled in dollars.

“People are selling forwards because of concerns over a possible cut in bond purchases by the Fed,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “The 12-month ringgit forwards could trade between 3.18 and 3.20 to the dollar in the longer term.”

One-month implied volatility in the ringgit, a measure of exchange-rate swings used to price options, climbed 14 basis points, or 0.14 percentage point, to 9.32 percent today and advanced 166 basis points this week.

Sales at U.S. retailers rose more than forecast in May, and claims for unemployment benefit dropped, official reports in Washington showed yesterday. Malaysia’s consumer prices rose 1.7 percent in May from a year, matching the gain in April that was the biggest since April 2012, according to the median estimate of economists surveyed by Bloomberg.

The yield on the 3.48 percent government bonds due March 2023 increased seven basis points this week to 3.46 percent, according to data compiled by Bloomberg. The rate decreased one basis point today.

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