Ringgit Climbs to 10-Month High on Rate-Increase Bets, Growth

Malaysia’s ringgit climbed to a 10-month high on speculation the pace of economic growth and prospects of another interest-rate increase will spur inflows.

The currency was little changed at 3.1455 per dollar as of 10:14 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It rose as much as 0.2 percent to 3.1415 earlier, the strongest level since Oct. 29, and Malayan Banking Bhd. predicts it could reach “fair value” of 3.10-3.12 in the coming weeks.

Gross domestic product in Southeast Asia’s third-biggest economy increased 6.4 percent in the second quarter, the fastest rate in more than a year and more than analysts had forecast. Bank Negara Malaysia raised its policy rate in July for the first time in three years and 11 of 22 economists surveyed by Bloomberg see another hike at the Sept. 18 review.

“The main event is the policy announcement and there could be expectations of better economic indicators,” said Saktiandi Supaat, the Singapore-based head of foreign-exchange research at Malayan Banking. “The dollar is still probably going to strengthen into the end of the year and this should limit a bit of Asian strength.”

Maybank is neutral-to-bullish on the ringgit and sees the currency weakening to 3.20 by year-end as an increase in U.S. interest rates bolsters the greenback, Supaat said.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, declined 14 basis points, or 0.14 percentage point, to 5.57 percent.

Bank Negara is seen boosting the policy rate next month to 3.5 percent from 3.25 percent, according to the survey. The final meeting of 2014 is scheduled for Nov. 6.

The cost to insure the nation’s debt using five-year credit-default swaps fell one basis point to 76.5 in New York yesterday, the lowest closing level since May 2013, CMA data show. The yield on Malaysia’s 3.654 percent sovereign bonds due October 2019 declined one basis point to 3.71 percent, according to data compiled by Bloomberg.

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