KUALA LUMPUT, Oct 17 — Malaysia’s ringgit rose to a one-month high on speculation the Federal Reserve will delay a reduction in bond purchases until the debt-ceiling debate is totally resolved. Sovereign bonds advanced.

President Barack Obama signed into law a measure ending the 16-day government shutdown and extending the nation’s borrowing authority until early next year. The deal funds the government at Republican-backed spending levels through January 15, 2014, and suspends the debt limit through February 7. Malaysia may unveil measures in the October 25 budget to trim its fiscal deficit to 3 per cent of gross domestic product from 4.5 per cent, Jonathan Cavenagh, a currency strategist in Singapore at Westpac Banking Corp., wrote in a research note yesterday.

“There was a broad sell-off in the dollar,” said Andy Ji, a Singapore-based currency strategist at Commonwealth Bank of Australia. “Tapering might not take place until there’s some kind of resolution on the debt ceiling on a more permanent basis.”

The ringgit strengthened 0.8 per cent to 3.1502 per dollar at the close in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. It reached 3.1467, the strongest since September 20. The Bloomberg US Dollar Index fell 0.6 per cent, adding to yesterday’s 0.1 per cent drop.

US rating

China’s Dagong Global Credit Rating Co. downgraded the local- and foreign-currency credit ratings of the US to A- from A, maintaining a negative outlook, citing concern about the deterioration on the US government’s solvency, according to a statement from the company today.

The greenback came under renewed selling pressure after the downgrade as it highlighted concern about a potential similar move by Fitch Ratings, according to a research report from Citigroup Inc. today. Fitch placed the US’s AAA credit grade on rating watch negative yesterday.

Should Malaysia announce fiscal consolidation measures in next week’s budget, it would help the ringgit break out of the 3.15 to 3.25 per dollar range, according to Westpac’s Cavenagh. A definitive push below 3.15 would target a move back toward 3.08, he said in the research note.

“In the near term, risk sentiment is positive because of the deal being struck,” said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. “But, at the same time, when you look at the details of the deal, it’s more like kicking the can down the road.”

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 60 basis points to 8.88 per cent.

The yield on the 3.172 per cent notes due July 2016 dropped six basis points, or 0.06 percentage point, to 3.17 per cent, according to data compiled by Bloomberg. That’s the lowest level since June 17. — Bloomberg