Malaysia Ringgit, Bonds Fall as U.S. Data Spur Fed Tapering Bets

Malaysia’s ringgit slid to a two-week low and bonds fell after better-than-expected U.S. jobs data bolstered the case for the Federal Reserve to rein in monetary stimulus that’s spurred inflows to emerging markets.

Payrolls in the world’s largest economy rose by 195,000 for a second month in June, exceeding the 165,000 median forecast of economists in a Bloomberg survey, a July 5 report showed. Federal Reserve Chairman Ben S. Bernanke said June 19 the central bank may reduce its bond buying this year if growth meets projections. Minutes of the Fed’s meeting last month are due July 10. Malaysian exports fell for a fourth month in May, according to official data released July 5.

“It’s just purely the payroll numbers on Friday from the U.S.” that’s driving the ringgit’s movements, said Sean Yokota, head of Asia strategy in Singapore at Skandinaviska Enskilda Banken AB. “The minutes that are coming out are going to be the main event.”

The ringgit weakened 0.7 percent to 3.2088 per dollar as of 4:24 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency touched 3.2140, the lowest since June 25. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, jumped 40 basis points, or 0.40 percentage point, to 9.03 percent.

Malaysia’s overseas sales fell 5.8 percent in May from a year earlier, the biggest decline in three months, government data showed July 5. The central bank imposed a maximum tenure for mortgages and personal loans last week, joining neighbor Singapore in implementing measures to limit risks stemming from rising household debt

The yield on Malaysia’s 3.26 percent notes due March 2018 increased one basis point to 3.37 percent, according to data compiled by Bloomberg. It dropped 12 basis points last week, after climbing 19 basis points in June.

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