Malaysia’s Ringgit Declines for Third Week on Fed Tapering Bets

Malaysia’s ringgit declined for a third week after U.S. data beat estimates, stoking speculation the Federal Reserve will start trimming its stimulus earlier than predicted. Bonds retreated.

The world’s biggest economy expanded 2.8 percent in the third quarter, faster than the 2 percent forecast by economists, an official report showed yesterday. Malaysian exports climbed 5.6 percent in September, slower than a revised 13 percent increase in the preceding month, according to a Trade Ministry statement today. That was more than the 5 percent estimate in a Bloomberg survey.

“Most Asian currencies, including the ringgit, are weakening in reaction to the positive U.S. data,” said Yeah Kim Leng, chief economist at RAM Holdings Bhd. in Kuala Lumpur. “The better-than-expected numbers had a neutral impact on the Malaysian currency.”

The ringgit fell 0.3 percent this week to 3.1794 per dollar in Kuala Lumpur, according to data compiled by Bloomberg. The currency gained 0.1 percent today and has surged 2.5 percent this quarter, the best performance among 24 emerging-market currencies tracked by Bloomberg.

One-month implied volatility in the ringgit, a measure of expected moves in the exchange rate used to price options, rose 110 basis points, or 1.10 percentage points, to 9 percent during the five days.

The central bank held its benchmark interest rate at 3 percent yesterday. Bank Negara Malaysia’s policy statement suggested continued dovishness, with the intention to keep borrowing costs unchanged in the first half of 2014, Lee Heng Guie, regional head of economics at CIMB Investment Bank Bhd. in Kuala Lumpur, wrote in a research report today.

The yield on the government’s 3.48 percent bonds due March 2023 increased two basis points today and seven basis points from Nov. 1 to 3.72 percent, according to data compiled by Bloomberg.

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