Malaysian Ringgit Gains on Signs Emerging-Market Concern Easing

Malaysia’s ringgit completed its biggest two-day gain since October after U.S. stocks rallied and a selloff in developing-nation assets eased.

The Standard & Poor’s 500 Index rebounded yesterday after falling by the most in seven months the day before. Malaysian exports probably rose 10 percent in December from a year earlier, compared with 6.7 percent the previous month, according to a Bloomberg survey before data due Feb. 7. The ringgit fell to a three-year low last week as a slowdown in Chinese growth and political turmoil from Turkey to Thailand damped demand for emerging-market assets.

“Given how much we’ve seen risk aversion rise, I’m not sure how much more weakness we can see in the ringgit in the near term,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “Maybe people are starting to reassess and are not treating all emerging markets with the same brush.”

The ringgit advanced 0.3 percent to 3.3200 per dollar in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. Its two-day gain of 0.8 percent is the biggest since Oct. 17. The currency has declined 4.4 percent in three months and touched 3.3472 on Jan. 27, the weakest level since May 2010.

One-month implied volatility in the ringgit, a measure of expected moves in the exchange rate used to price options, fell 10 basis points, or 0.1 percentage point, to 7.73 percent.

Current Account

Malaysia’s trade surplus probably narrowed to 9.6 billion ringgit ($2.9 billion) in December from a 20-month high of 9.7 billion ringgit in November, the Bloomberg survey of economists showed. The current-account excess was 9.8 billion ringgit in the third quarter of 2013, compared with 2.6 billion ringgit in the preceding period, according to official data. Figures for the fourth quarter are due Feb. 12.

Nomura Holdings Inc. is positive on the ringgit because of the nation’s improving current-account position and prospects for fiscal consolidation, Singapore-based strategists Craig Chan and Wee Choon Teo wrote in a note to clients yesterday.

Overseas holdings of Malaysian government and corporate debt increased 0.6 percent to 233 billion ringgit in December, according to the latest available central bank data.

The yield on Malaysia’s 3.26 percent government bonds due March 2018 was steady at 3.71 percent, data compiled by Bloomberg show.

Before it's here, it's on the Bloomberg Terminal.