Ringgit Advances Most in Three Weeks on China Reform Pledge

Malaysia’s ringgit climbed the most in three weeks after China, the nation’s top export destination, announced economic reforms including plans for market-determined interest rates. Ten-year government bonds fell.

The ringgit rose for a third day after a Nov. 15 statement from China’s Communist Party showed the world’s second-largest economy will also expand farmers’ land rights, loosen the one-child policy and encourage private investment in state businesses. Malaysia’s gross domestic product increased 5 percent last quarter, the fastest pace since the period ended December, as overseas shipments recovered, central bank data showed on Nov. 15.

“Markets have reacted positively to the reform announcements from China’s third plenum,” said Khoon Goh, a senior foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “As the ringgit was trading poorly last week, there has been a bit of a retracement.”

The ringgit strengthened 0.5 percent, the biggest gain since Oct. 28, to 3.1881 per dollar in Kuala Lumpur, data compiled by Bloomberg show. It touched a one-week high of 3.1837. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 30 basis points to 8.33 percent.

Current Account

The outlook for the ringgit is relatively stable given the improving global trade and likely tapering of Federal Reserve stimulus in March, Leong Sook Mei, Southeast Asian head of global markets research in Singapore at Bank of Tokyo-Mitsubishi UFJ Ltd., said in an interview today. The ringgit will probably “gravitate” around the 3.00-3.25 per dollar range over the next six months, she said.

Malaysia’s current-account surplus increased to 9.8 billion ringgit ($3.1 billion) in the three months through September from 2.6 billion ringgit in the previous period, according to a Nov. 15 government report.

The 10-year sovereign bond yield rose two basis points, or 0.02 percentage point, to 3.95 percent, the highest level since Sept. 5, according to data compiled by Bloomberg. The yield on the 3.172 percent securities maturing July 2016 fell one basis point to a two-week low of 3.12 percent.

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