Malaysia’s ringgit climbed to a one- week high after European leaders agreed to relax repayment rules for emergency loans to Spanish banks, allaying concern the region’s debt crisis will worsen.
The MSCI Asia-Pacific Index of stocks reversed an earlier loss to gain by the most in almost three weeks after a condition that governments get preferred creditor status on crisis loans to Spain’s troubled banks was dropped. Lenders can also be recapitalized directly with funds rather than going through governments, European Union President Herman Van Rompuy said today. The ringgit headed for its first quarterly loss since September 2011 after Malaysia’s exports fell for a second month in April, official data showed June 6.
“These are things that the market has voiced concern about and they have addressed some of it,” said Philip Wee, a Singapore-based senior currency economist at DBS Group Holdings Ltd., referring to the European decision. “There’s some progress with regards to allowing the permanent bailout funds to recapitalize banks directly.”
The ringgit gained 0.2 percent to 3.1872 per dollar as of 12:12 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.1840, the strongest level since June 22. The currency’s 0.2 percent advance this week pared its monthly loss to 0.5 percent. The ringgit’s 4 percent decline this quarter is the second-worst performance among Asia’s 10 most- traded currencies after India’s rupee.
One-month implied volatility, a measure of exchange-rate swings used to price options, fell 20 basis points to 6.80 percent today.
Government bonds retreated today. The yield on the 3.58 percent notes due September 2018 climbed one basis point, or 0.01 percentage point, to 3.38 percent, according to Bursa Malaysia. The rate fell 18 basis points this week and 17 basis points this quarter.
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