Ringgit at 5-month low in pro-dollar market
PUBLISHED JANUARY 23, 2014
[KUALA LUMPUR] The Malaysian ringgit touched the lowest level in almost five months on speculation that investors are favouring the US dollar as the American economy strengthens and the Federal Reserve pares record stimulus.
On Tuesday, the International Monetary raised its 2014 growth forecast for the world's largest economy to 2.8 per cent from 2.6 per cent, and boosted projections for developing Asia to 6.7 per cent from 6.5 per cent.
The yield on Malaysia's 10-year government bonds climbed for a second day. Data from the Statistics Department released later yesterday showed that Malaysia's consumer price index in December rose 3.2 per cent from a year earlier, reflecting a rise in prices of food and non-alcoholic beverages as well as transport.
The rate is the highest since November 2011 and exceeds the forecast of 3.1 per cent in a Reuters poll of 11 economists.
"Investors are putting back on the bullish-dollar view," said Khoon Goh, a Singapore-based strategist at Australia & New Zealand Banking Group.
The currency depreciated 0.1 per cent, a third day of losses, to 3.3288 per dollar at 10.35 am in Kuala Lumpur, according to data compiled by Bloomberg. It earlier touched 3.3358, the lowest level since Aug 28.
The Bloomberg US Dollar Index, which tracks the currency against 10 major counterparts, increased 1.2 per cent this year, while the ringgit declined 1.6 per cent.
One-month implied volatility in the ringgit, a measure of expected moves in the exchange rate used to price options, rose four basis points, or 0.04 percentage point, to 7.44 per cent. That's below the 2013 average of 7.99 per cent.
Bank Negara Malaysia sold dollars and bought the ringgit yesterday to limit the drop in the local currency, with offers to sell "modest" amounts of the greenback near the 3.3350 level, according to two traders based in Asia who asked not to be identified.
The central bank declined to comment when asked if policy makers intervened in the market yesterday.
"We've seen some Bank Negara agent names in the past few sessions," said Andy Ji, a Singapore-based currency strategist at Commonwealth Bank of Australia. "It's to smooth out the volatility."
Earlier, the median estimate of economists in a Bloomberg survey had shown that Malaysia's consumer prices rose 3.1 per cent in December from a year earlier, compared with a 2.9 per cent gain in November.
Market speculation that Malaysia will increase interest rates may be "premature" as the pick-up in inflation is mainly due to administrative adjustments after the government raised fuel and electricity tariffs, DBS Group Holding analysts including Singapore-based Irvin Seah wrote in a Jan 21 report. - Bloomberg, Reuters
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