Ringgit Falls for a Second Day on U.S. Interest-Rate Speculation

Malaysia’s ringgit dropped for a second day as a signal from the Federal Reserve that it’s on target to increase interest rates next year boosted demand for the dollar.

“Many” Federal Open Market Committee participants said they might have to raise borrowing costs sooner than they had anticipated, according to minutes from the July meeting issued yesterday. Malaysian data yesterday showed inflation eased in July, continuing its retreat from a three-year high and damping odds for further rate increases.

“The dollar is stronger because the Fed minutes were more hawkish than the market expected,” said Wong Chee Seng, a currency strategist at AmBank Group in Kuala Lumpur. The inflation data didn’t “provide a strong case for the central bank to hike the policy rate,” he said.

The ringgit declined 0.1 percent to 3.1710 per dollar in Kuala Lumpur, data compiled by Bloomberg show. It earlier reached 3.1778, the weakest level since Aug. 15. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, traded at a six-month high.

One-month implied volatility in the ringgit, a measure of expected moves in the exchange rate used to price options, rose 27 basis points, or 0.27 percentage point, to 5.75 percent.

Malaysia’s consumer prices increased 3.2 percent in July from a year earlier. That was less than the 3.3 percent in June, which was also the pace forecast in a Bloomberg survey of economists.

The central bank raised its benchmark policy rate for the first time in three years by 25 basis points to 3.25 percent on July 10. The next meeting is due Sept. 18. Second-quarter gross domestic product climbed 6.4 percent, beating the 5.8 percent estimate, official data showed on Aug. 15.

The yield on Malaysia’s 10-year government bonds increased one basis point to 3.95 percent, according to data compiled by Bloomberg. The rate fell two basis points yesterday.

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