Malaysia’s ringgit strengthened the most in more than a week, rebounding from a three-year low, as some investors judged this month’s losses excessive.
The currency’s 3.6 percent slump in June is Asia’s worst performance after the Indian rupee’s 5.3 percent slide. The dollar’s 14-day relative strength index versus the ringgit reached 74 today, above the 70 threshold level that suggests it may decline. The Malaysian unit also gained after two Federal Reserve presidents signaled U.S. monetary policy will remain accommodative even after asset purchases are phased out.
“The ringgit has been oversold this month,” said Yeah Kim Leng, chief economist at RAM Holdings Bhd. in Kuala Lumpur. “The Malaysian currency could rebound to 3.00 to 3.10 by the end of the year as it is backed by solid fundamentals.”
The ringgit appreciated 0.3 percent to 3.2105 per dollar as of 10:31 a.m. in Kuala Lumpur, the biggest advance since June 14, according to data compiled by Bloomberg. The currency touched 3.2222 yesterday, the weakest level since July 2010.
One-month implied volatility, a measure of exchange-rate swings used to price options, increased two basis points, or 0.02 percentage point, to 10.39 percent today.
Fed Chairman Ben S. Bernanke signaled on June 19 the central bank may “moderate” its $85 billion in monthly bond purchases, known as quantitative easing, later this year and end it by mid-2014 if the U.S. economy improves.
Investors shouldn’t overreact to the Fed’s plan to reduce the pace of asset purchases, Richard Fisher, president of the Federal Reserve Bank of Dallas, said yesterday. Minneapolis Fed President Narayana Kocherlakota said the monetary authority must emphasize in its statement that policy will remain accommodative “for a considerable time” after the end of quantitative easing.
The Malaysian economy grew 4.1 percent in the first three months of the year, the 14th consecutive quarter of expansion, according to official data.
Government bonds declined for a sixth day. The yield on the 3.48 percent notes due March 2023 gained five basis points to 3.73 percent, the highest since the securities were sold in March, according to data compiled by Bloomberg.
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