Photographer: Kiyoshi Ota/Bloomberg

Fast & Furious Ringgit Needs to Take Pit Stop, State Street Says

  • Ringgit has outperformed Asian peers on hawkish central bank
  • Overseas investors bought almost $2 billion of debt in Sept.

After going from last to first in Asia, the Malaysian ringgit may be headed for a break -- before resuming its rally.

Momentum indicators, including slow stochastics, show the ringgit is overbought. The currency has surged 3.6 percent against the dollar in the past month, the best performer as oil prices climbed and the central bank signaled a potential interest-rate increase. It was the worst-ranked emerging Asian currency in the same four-week period last year, as a crackdown on speculators and expectations of a stronger greenback spurred outflows.

“There’s potentially a bit more room to go, but if you look at the chart, perhaps it may need a bit of consolidation at some point,” said Ng Kheng Siang, Asia Pacific head of fixed income at State Street Global Advisors in Singapore, which oversees $2.7 trillion. “It’s a catch-up play. Last year there were quite a number of issues affecting Malaysia.”

The ringgit has dropped for three straight days after surging to a 15-month high on Monday. Overseas investors bought almost $2 billion of Malaysia’s sovereign debt in September, the biggest inflow in four months.

“If you have some new money you may want to re-position in areas that haven’t done well but don’t look that bad,” Ng said. “That’s why we’ve seen a late surge in Malaysian assets.”

— With assistance by David Finnerty

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