Bloomberg News

Ringgit Poised for First Weekly Drop Since March Before Election

May 02, 2013

Malaysia’s ringgit was poised for its first weekly drop since March and government bonds rose as the prospect of a close election this weekend unsettled investors.

Anwar Ibrahim’s opposition alliance is seeking its first win in the May 5 contest, which will probably be the tightest in the nation’s history, Australia & New Zealand Banking Group Ltd. said in a research note this week. Prime Minister Najib Razak has embarked on a $444 billion development plan to transform Malaysia into a developed nation by 2020. The price of crude oil, of which Malaysia is a net exporter, fell 3.9 percent in April.

“There are concerns that if the opposition wins, they have no track record and we could be in a period of uncertainty,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. “The recent fall in oil may have dragged the ringgit down.”

The ringgit declined 0.4 percent this week to 3.0468 per dollar as of 9:20 a.m. in Kuala Lumpur, the first drop since the period ended March 15, according to data compiled by Bloomberg. It gained 0.1 percent today after a report yesterday showed the number of Americans filing claims for jobless benefits unexpectedly dropped last week.

The ruling Barisan Nasional coalition has 55 percent support, compared with 41 percent for the opposition group, according to a survey by Universiti Utara Malaysia published in the New Straits Times today.

One-month implied volatility in the ringgit, a measure of expected moves in exchange rates used to price options, climbed 102 basis points this week and 48 basis points today to 8.99 percent.

The yield on the 3.26 percent bonds due March 2018 dropped one basis point since April 26 to 3.16 percent, according to data compiled by Bloomberg. The rate was steady today.

To contact the reporter on this story: Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.


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