Malaysia’s Ringgit Touches 3-Week High on Fed Stimulus Optimism

Malaysia’s ringgit rose to a three-week high and bonds climbed after Federal Reserve Chairman Ben S. Bernanke said the U.S. economy still requires stimulus.

The world’s largest economy needs “highly accommodative monetary policy for the foreseeable future,” Bernanke said yesterday. Minutes of the Fed’s June meeting released yesterday showed policy makers were divided on whether to halt debt purchases that have fueled fund flows to emerging markets. Bank Negara Malaysia will keep its benchmark rate at 3 percent today, according to all 19 economists in a Bloomberg survey.

“Ringgit bears will take a break for a while,” said Vishnu Varathan, an economist at Mizuho Corporate Bank Ltd. in Singapore. “Bernanke temporarily eased concerns about a capital outflow from emerging markets.”

The ringgit gained 0.5 percent to 3.1650 per dollar as of 4:04 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.1533 earlier, the strongest level since June 19. One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell 17 basis points, or 0.17 percentage point, to 8.29 percent.

Malaysian factory output increased 3.4 percent in May from a year earlier, beating economists’ estimate for a 2 percent gain, a government report showed today.

The yield on the 3.172 percent sovereign bonds due July 2016 declined two basis points to 3.28 percent, according to data compiled by Bloomberg. The rate on 3.48 percent, 10-year notes dropped one basis point to 3.68 percent.

Malaysia’s monetary conditions are positive for government debt and the yield on 10-year securities may reach 3.6 percent by year-end, according to a research note from ING Groep NV today.

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