Ringgit Declines as U.S. CPI Tempers Rate-Rise Delay Speculation

The ringgit fell amid conflicting signals as to when the U.S. will raise interest rates and on further concern about a Malaysian state investment company’s finances.

The currency halted a two-day gain after data Tuesday showed a pick up in U.S. inflation and new home sales. The Federal Reserve indicated last week it will probably wait until the second half before increasing rates and will go slowly once the policy tightening starts. 1Malaysia Development Bhd. may have difficulty in obtaining funding for a power plant project awarded last year, according to a report on the Malay Mail Online news website Wednesday.

“With U.S. inflation going back up slightly, the case may not be so strong for the Fed to continue to postpone the timing of the rate hike,” said Choong Yin Pheng, senior manager for bond and economic research at Hong Leong Bank Bhd. in Kuala Lumpur. “1MDB definitely affects sentiment.”

The ringgit fell 0.5 percent to 3.6660 a dollar in Kuala Lumpur, after gaining 2.3 percent in the past two days, data compiled by Bloomberg show. It dropped as much as 0.6 percent earlier and reached a six-year low of 3.7350 on March 20.

1MDB could face challenges in obtaining funding for the coal-fired power plant, which is co-owned by Japan’s Mitsui & Co., according to the Malay Mail Online report, citing the Energy, Green Technology and Water Ministry. The investment company got a government standby credit facility this month after repaying an overdue loan, amid criticism from lawmakers about its rising debt levels.

Government bonds were little changed, with the yield on five-year notes at 3.61 percent, data compiled by Bloomberg show.

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