Bloomberg News

Ringgit Leads Asia Declines as U.S. Government Shutdown Looms

September 29, 2013

Malaysia’s ringgit fell, leading losses in Asia, amid a U.S. budget stalemate that raises the risk of the first government shutdown in 17 years. Sovereign bonds were little changed.

The House of Representatives voted 231-192 yesterday to stop many of the Affordable Care Act’s central provisions for one year, tying it to an extension of government funding through Dec. 15. Should the Senate reject the bill today, the government could be shut down from tomorrow. Malaysian bond yields are likely to rise as inflation accelerates after the authorities cut fuel subsidies this month, according to a Sept. 27 report from Barclays Plc analysts led by London-based Christian Keller.

“It looks like we’re not going to get any agreement between the two major parties in the U.S.,” said Khoon Goh, a senior currency strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “So the market is now pricing in a government shutdown from midnight.”

The ringgit declined 1 percent to 3.2606 per dollar as of 10:11 a.m. in Kuala Lumpur, the worst performance among Asia’s 11 most-traded currencies, according to data compiled by Bloomberg. It gained 0.7 percent in September, trimming its quarterly loss to 3.1 percent. One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose 56 basis points today to 10.79 percent.

Fuel Prices

Malaysian consumer prices increased 1.9 percent in August from a year earlier, after rising 2 percent in July, the fastest pace in 16 months, according to official figures. The government will announce September data on Oct. 23.

Prime Minister Najib Razak increased the price of the RON 95 grade of gasoline and of diesel by 20 sen each to 2.10 ringgit and 2 ringgit a liter, respectively, on Sept. 3. The move will help the government save about 1.1 billion ringgit ($337 million) this year and 3.3 billion ringgit annually in the future by reducing state subsidies, he said.

The yield on the 3.48 percent government notes due March 2023 was steady at 3.77 percent, according to data compiled by Bloomberg. The rate fell 32 basis points in September, the biggest monthly drop since the notes were issued in March. It has climbed 14 basis points this quarter.

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: Amit Prakash at aprakash1@bloomberg.net


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