Bloomberg News

Ringgit Set for Fourth Weekly Decline on European Debt Crisis

November 27, 2011

Nov. 25 (Bloomberg) -- Malaysia’s ringgit headed for a fourth straight weekly decline on concern Europe’s lingering sovereign-debt crisis will damp demand for higher-yielding emerging-market assets.

The currency fell to its weakest level since Oct. 5 this week as Malaysia’s benchmark stock index dropped to a one-month low. The ringgit’s three-month implied volatility, a measure of foreign-exchange swings used to price options, rose to a two- week high of 12.20 percent on Nov. 22, suggesting further losses. The Bloomberg-JPMorgan Asia Dollar Index retreated after German Chancellor Angela Merkel ruled out an expanded role for the European Central Bank in fighting the debt crisis.

“The European situation has sparked risk aversion,” said Enrico Tanuwidjaja, a currency strategist at Malayan Banking Bhd. in Singapore. “Domestically there is nothing worrying. Global developments play a more crucial role in explaining the weakening of the ringgit and high volatility.”

The ringgit dropped 0.9 percent this week to 3.1890 per dollar as of 9:26 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency weakened 0.2 percent today.

Bank Negara Malaysia is prepared to step into the market “to smooth out this excessive volatility or movement in any one particular day,” Governor Zeti Akhtar Aziz said in Kuala Lumpur on Nov. 18.

Gross domestic product rose 5.8 percent in the three months through September from a year earlier, after expanding a revised 4.3 percent in the prior quarter, the central bank said last week. The median growth estimate of economists in a Bloomberg News survey was 4.8 percent.

The yield on the government’s 3.434 percent bonds due August 2014 increased three basis points, or 0.03 percentage point, to 3.12 percent this week, according to Bursa Malaysia. The rate dropped one basis point today.

--Editors: Ven Ram, Andrew Janes

To contact the reporter on this story: Lilian Karunungan in Singapore at

To contact the editor responsible for this story: Sandy Hendry at

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