Ringgit Climbs Most in Seven Weeks as Losses Judged Excessive

Malaysia’s ringgit strengthened the most in more than seven weeks, rebounding from a three-year low, as some investors judged this month’s losses excessive. Government bonds fell.

The ringgit’s 2.8 percent slump in June is Asia’s worst performance after the Indian rupee’s 5.1 percent slide. The dollar’s 14-day relative strength index versus the ringgit reached 74 today, above the 70 threshold level that suggests it may decline. The Malaysian unit also gained after two Federal Reserve presidents said U.S. monetary policy will remain accommodative even after asset purchases are phased out.

“The ringgit has been oversold this month,” said Yeah Kim Leng, chief economist at RAM Holdings Bhd. in Kuala Lumpur. “The Malaysian currency could rebound to 3.00 to 3.10 by the end of the year as it is backed by solid fundamentals.”

The ringgit appreciated 1.2 percent to 3.1825 per dollar, the biggest gain since May 6, according to data compiled by Bloomberg. The currency touched 3.2222 yesterday, the weakest level since July 2010.

One-month implied volatility, a measure of exchange-rate swings used to price options, dropped 43 basis points, or 0.43 percentage point, to 9.94 percent today.

Fed Chairman Ben S. Bernanke signaled on June 19 the central bank may “moderate” its $85 billion in monthly bond purchases, known as quantitative easing, later this year and end it by mid-2014 if the U.S. economy improves.

Fed Outlook

Investors shouldn’t overreact to the Fed’s plan to reduce the pace of asset purchases, Richard Fisher, president of the Federal Reserve Bank of Dallas, said yesterday. Minneapolis Fed President Narayana Kocherlakota said the monetary authority must emphasize in its statement that policy will remain accommodative “for a considerable time” after the end of quantitative easing.

The Malaysian economy grew 4.1 percent in the first three months of the year, the 14th consecutive quarter of expansion, according to official data released in May.

The yield on 10-year government bonds rose to the highest level since November 2011. The amount paid on the 3.48 percent government notes due March 2023 surged 10 basis points to 3.77 percent in Kuala Lumpur, according to data compiled by Bloomberg.

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