Ringgit Falls to Four-Month Low on China Data, Fed-Taper Concern

Malaysia’s ringgit fell to a four-month low as data in China, the nation’s biggest overseas market, fell short of estimates and a recovery in the U.S. bolstered the case for the Federal Reserve to trim stimulus.

Output at U.S. factories, mines and utilities climbed in December to cap the strongest quarter since 2010, official figures showed Jan. 17. Job openings rose in November to the most in more than five years. China today reported the slowest factory output growth in five months and the weakest investment increase since 2002. The world’s second-largest economy expanded 7.7 percent in the fourth quarter from a year earlier, higher than the median estimate of 7.6 percent in a Bloomberg survey.

“By and large, people have decided that Fed tapering will go on,” said Vishnu Varathan, a senior economist at Mizuho Bank Ltd. in Singapore. “China’s growth is a tad higher than expected. But softer-than-expected industrial production and fixed-asset investments will keep any optimism in check.”

The ringgit fell 0.6 percent from Jan. 16 to 3.3175 per dollar in Kuala Lumpur, the weakest level since Sept. 11, according to prices from local banks compiled by Bloomberg. It was the biggest loser among Asia’s 11 most-traded currencies. Malaysia’s financial markets were shut on Jan. 17 for a public holiday.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 29 basis points, or 0.29 percentage point, to 7.20 percent.

China Data

Global funds held 29 percent of Malaysian government bonds at the end of November, compared with 32 percent in Indonesia and 18 percent in Thailand, official data show.

Industrial output in China, the biggest buyer of Malaysian palm oil, rose 9.7 percent in December from a year earlier, the National Bureau of Statistics said today. That compared with the 9.8 percent median forecast of 44 analysts and a 10 percent gain in November. Fixed-asset investment excluding rural households increased 19.6 percent in the January-to-December period, compared with the 19.8 percent median estimate.

“Malaysia, perhaps through their exports of commodities to China, reacts to Chinese data more than others in the region,” said Nizam Idris, head of strategy for fixed income and currencies at Macquarie Bank Ltd. in Singapore.

Westpac Banking Corp. has shifted its bias for the ringgit back to neutral for this week from long as a drop in the local stock market weighs on sentiment, Singapore-based foreign-exchange strategist Jonathan Cavenagh wrote in a Jan. 17 research note. The benchmark KLCI share index fell 0.7 percent last week, its third straight decline.

Malaysia’s central bank plans to introduce a new reference rate framework for banks to price their consumer loans to better reflect market conditions, according to a Jan. 16 e-mailed statement from the monetary authority.

The yield on Malaysia’s 3.26 percent sovereign notes due March 2018 was little changed at 3.62 percent, according to data compiled by Bloomberg.

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