Ringgit Volatility Declines to 11-Month Low on Current Account

A measure of expected swings in the ringgit fell to an 11-month low on speculation Malaysia’s widening current-account surplus will buoy the currency as the U.S. pares stimulus.

The excess in the broadest measure of trade increased to

17.5 billion ringgit ($5.3 billion) in the fourth quarter, which would be the biggest surplus in a year, according to the median estimate of economists in a Bloomberg survey before data due at 6 p.m. local time today. The ringgit extended gains after China, Malaysia’s top export market, reported growth in overseas shipments and imports beat forecasts.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 27 basis points to 6.60 percent in Kuala Lumpur, according to data compiled by Bloomberg. It reached 6.52 percent, the lowest level since March 14, 2013. The gauge has declined 130 basis points, or 1.30 percentage points, in seven days.

“Tonight’s current-account data should show a fairly decent improvement,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “As you’ve seen sentiment around equity markets and broader emerging-market sentiment calm down, the natural volatility is starting to subside.”

Malaysia’s benchmark stock index has rallied 1.2 percent this month following a 3.4 percent drop in January that was driven by concern China’s growth is slowing.

GDP Report

The ringgit strengthened 0.3 percent, the biggest gain since Feb. 4, to 3.3225 per dollar, trimming its three-month loss to 3.4 percent, data compiled by Bloomberg show. It climbed as much as 0.5 percent earlier to 3.3175.

China’s overseas shipments rose 10.6 percent in January from a year earlier, exceeding the median forecast of economists for a 0.1 percent increase, data showed today. Imports increased 10 percent, versus a 4 percent predicted gain, resulting in a trade surplus of $31.9 billion.

Malaysia’s statistics department may report later today that gross domestic product climbed 4.8 percent in the fourth quarter, after an increase of 5 percent in the previous three months, a separate Bloomberg survey showed before the data due at 6 p.m. For the full year, GDP growth is predicted at 4.7 percent versus 5.6 percent in 2012.

Accelerating inflation is raising the likelihood that the central bank will boost the benchmark interest rate, currently at 3 percent, this year for the first time since 2011. Consumer prices climbed 3.2 percent in December, the fastest pace since November 2011. January figures are due Feb. 19.

The yield on Malaysia’s 3.26 percent government bonds due March 2018 advanced one basis point to 3.71 percent, while the yield on 10-year notes also climbed one basis point to 4.16 percent.

Barclays Plc sees a “high” probability of a Malaysian interest-rate increase this year, analysts including Singapore-based Rahul Bajoria wrote in a research note today.

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