Malaysia’s ringgit fell to the lowest level in more than four months on concern an economic recovery in Europe will deter investors from seeking relatively faster growth in emerging markets, slowing fund inflows.
Economic confidence in the euro area rose more than analysts estimated this month, a European Commission index showed yesterday, adding to signs that the bloc may be emerging from a recession. Global funds held more local-currency government bonds in Malaysia than in Thailand and Indonesia as of November 2012, official data show.
“We’re seeing a lot of talk about safe-haven flows coming out of Asia and the Malaysian bond market is very heavily owned by foreign investors,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “With Europe starting to normalize a little bit, the risk-reward of staying in the Malaysian bond market may not be as compelling as what it was six to 12 months ago.”
The ringgit weakened 0.4 percent to 3.0955 per dollar as of 9:30 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.1009 earlier, the lowest since Sept. 11. The currency has slid 1.3 percent since Dec. 31, heading for the worst month since a 4.6 percent drop in May.
One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose 33 basis points, or 0.33 percentage point, to 6.83 percent.
Malaysia’s economy expanded 5.2 percent in the quarter ended Sept. 30 from a year earlier, while gross domestic product contracted 0.36 percent in the euro area, according to official figures. Bank Negara Malaysia will keep its benchmark overnight rate at 3 percent at its review today, according to all 22 economists in a Bloomberg survey.
Government bonds fell. The yield on the 3.314 percent notes due October 2017 rose two basis points to 3.23 percent, according to Bursa Malaysia.
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