Ringgit Forwards Extend Drop After Central Bank Holds Key Rate

Forwards in Malaysia’s ringgit extended losses after the central bank left the benchmark interest rate unchanged.

One-month contracts dropped 0.6 percent to 3.2492 per dollar as of 6:09 p.m. in Kuala Lumpur and reached 3.2528, the lowest level since May 8, according to data compiled by Bloomberg. The decision to keep the policy rate on hold was predicted by 11 of 21 economists surveyed by Bloomberg, with the rest expecting a 25 basis-point rise.

The ringgit closed lower in the spot market ahead of today’s decision on speculation an increase in the Federal Reserve’s interest-rate target will spur outflows from emerging economies. The Fed raised by 25 basis points its median estimate for where the federal funds rate will be by the end of 2015 while reiterating a pledge to keep it near zero for a “considerable time,” Chair Janet Yellen said yesterday.

“With Bank Negara on pause for now, that is one support factor that has been removed from the ringgit,” said Khoon Goh, a senior strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “The stronger dollar environment will push the dollar-ringgit higher in the near term.”

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped eight basis points, or 0.08 percentage point, to 7.98 percent.

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