Ringgit in First Monthly Advance Since October on Taper Bets

Malaysia’s ringgit gained in February, halting a three-month loss, as U.S. data that trailed estimates spurred speculation the pace at which the Federal Reserve tapers stimulus will be eased.

Fed Chair Janet Yellen said yesterday that policy makers will monitor data to determine if recent weakness in the U.S. economy is temporary and “if there’s a significant change in the outlook” the central bank would be open to reconsidering reducing asset purchases, which are currently likely to end before the end of the year. Malaysia’s economy grew at the fastest pace in a year in the fourth quarter and attracted a record 38.8 billion ringgit ($11.8 billion) of foreign direct investment in 2013, official data show.

“Emerging-market currencies are getting a reprieve this month because data from the U.S. aren’t that robust, suggesting that the tapering will be gradual and extended,” said Yeah Kim Leng, chief economist at RAM Holdings Bhd. in Kuala Lumpur. “Malaysia’s foreign direct investment numbers will spur economic growth and help strengthen the currency.”

The ringgit advanced 2 percent this month to 3.2770 per dollar in Kuala Lumpur, data compiled by Bloomberg show. The currency rose 0.6 percent this week. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped 101 basis points, or 1.01 percentage points, to 6.88 percent from Jan. 31.

Bonds Advance

U.S. payrolls rose 113,000 in January, less than the 180,000 advance forecast by economists surveyed by Bloomberg, while retail sales fell 0.4 percent, the biggest decrease since June 2012, data released this month showed.

The level of foreign direct investment in Malaysia can be sustained, Trade Minister Mustapa Mohamed told Bloomberg TV yesterday. The Southeast Asian nation’s economy expanded 5.1 percent in the fourth quarter from a year earlier.

The yield on Malaysia’s 3.26 percent government bonds due March 2018 dropped 19 basis points to 3.6 percent this month, the lowest level since Jan. 15, according to data compiled by Bloomberg. The yield declined three basis points for the week.

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