Malaysia’s ringgit was headed for its biggest weekly gain in more than two months on speculation a U.S. economic recovery will boost demand for local exports.
Gross domestic product in the world’s largest economy increased at a faster pace than previously estimated in the fourth quarter, while orders for durable goods climbed more than forecast in February, reports showed this week. The U.S. was the fourth-biggest buyer of Malaysian goods last year. Barclays Plc favors the ringgit as the currency will benefit from the authorities’ “prudent policies” and improving economic data.
“The expectation is that the U.S. economy will continue to improve,” said Yeah Kim Leng, chief economist at RAM Holdings Bhd. in Kuala Lumpur. “The resilience of the Malaysian economy has helped to boost sentiment on the currency.”
The ringgit strengthened 0.8 percent this week and 0.3 percent today to 3.0880 per dollar as of 10:10 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It was the best five-day performance since the period ended Jan. 11.
The currency has declined 1 percent this year amid approaching national elections, which Prime Minister Najib Razak must call within 60 days after the deadline for dissolving Parliament by the end of April. He has embarked on a $444 billion spending program to build railways, roads and power plants in an effort to lift the country to developed-nation status by 2020.
A government report on April 5 may show Malaysian exports contracted 4 percent in February after expanding 3 percent the previous month, according to the median estimate of economists in a Bloomberg survey.
One-month implied volatility in the ringgit, a measure of expected moves in the exchange rate used to price options, fell 29 basis points, or 0.29 percentage point, to 6.80 percent this week. It has dropped from 6.99 percent at the end of February.
Government bonds climbed this week. The yield on the 3.26 percent notes due March 2018 dropped one basis point to 3.22 percent, according to data compiled by Bloomberg. The rate was little changed today.
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