Ringgit rises the most in more than two weeks

comments     Liau Y-Sing, Bloomberg     Published     Updated

Malaysia’s ringgit rose the most in more than two weeks as a technical indicator signalled losses that drove it to a nine-year low were excessive.

The weakness doesn’t reflect economic fundamentals and the depreciation should be temporary, central bank governor Zeti Akhtar Aziz said in an e-mailed interview yesterday as the ringgit approached 3.8 per dollar, the level it was pegged at during the 1997-98 Asian financial crisis. It climbed 0.5 percent to 3.7540 as of 9.43am in Kuala Lumpur today.

Prospects that the US will raise interest rates this year for the first time since 2006 have weakened emerging-market currencies over the past month. The ringgit is vulnerable to such a move because of the relatively high foreign-ownership of the nation’s bonds, while lower Brent crude prices are weighing on earnings for the oil exporter.

“The ringgit’s move is just a consolidation from yesterday’s losses,” said Choong Yin Pheng, senior manager for bonds and economic research at Hong Leong Bank Bhd in Kuala Lumpur. “If there are no positive factors in the local market, the chances of the ringgit hitting 3.80 are there.”

The dollar’s 14-day relative-strength index against the ringgit rose to 75 yesterday, above the 70 level that suggested to some traders the greenback was poised to fall. The Bloomberg US Dollar Spot Index was little changed after dropping 1 percent in the previous session.

Malaysia’s currency depreciated 2.3 percent in the past three days and declined to 3.7743 yesterday, the lowest since January 2006. The peg was imposed as part of capital controls in 1998 after the ringgit depreciated 35 percent the previous year in the wake of a devaluation in the Thai baht. It was scrapped in July 2005.

The currency is expected to resume trading at levels that reflect the nation’s fundamentals when uncertainty affecting market sentiment subsides, Zeti said.

Government bonds fell for a 12th day. The 10-year yield rose one basis point to 4.17 percent, the highest for a benchmark of that maturity since January.

- Bloomberg



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