Bloomberg News

Ringgit Little Changed on European Debt Concern, Rate Outlook

September 06, 2011

Sept. 6 (Bloomberg) -- Malaysia’s ringgit was little changed even as mounting concern Europe’s sovereign-debt crisis will worsen reduced the likelihood of an interest-rate increase. Bonds advanced by the most in three months.

The central bank will keep its benchmark overnight rate unchanged at 3 percent on Sept. 8, according to all 18 economists surveyed by Bloomberg. The Stoxx Europe 600 Index posted its biggest two-day drop since March 2009 yesterday as the fifth election defeat for German Chancellor Angela Merkel’s party this year and reports of a rift between European leaders and the International Monetary Fund added to concern that support for bailing out indebted nations is waning.

“Fears the sovereign-debt crisis in Europe will worsen are reducing risk appetite,” said Calbert Loh, head of treasury at Bangkok Bank Bhd. in Kuala Lumpur. “Speculation of a domestic rate hike has subsided.”

The ringgit traded at 2.9830 per dollar as of 4:50 p.m. in Kuala Lumpur, compared with 2.9818 yesterday, according to data compiled by Bloomberg. It earlier reached a one-week low of 2.9895. The currency declined 0.6 percent yesterday, the most in more than two weeks.

The International Monetary Fund opposes European plans to force Greece to put up collateral in its second rescue, four people with direct knowledge of the matter said on Sept. 2. The use of collateral, a concession to win Finland’s backing for 109 billion euros ($155 billion) of loans pledged by euro leaders in July, would deny the IMF priority creditor status and violate Greek bondholders’ rights, said the people, who declined to be named because the talks are in progress.

Malaysia’s government bonds gained. The yield on the 4.262 percent notes due September 2016 decreased 10 basis points, or 0.10 percentage point, to 3.30 percent, according to Bursa Malaysia. That was the biggest decline since June 7.

--Editors: Andrew Janes, James Regan

To contact the reporter responsible for this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net.

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.


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