KUALA LUMPUR, Oct 30 — Malaysia’s ringgit dropped to a seven-month low after the Federal Reserve cited an improving labour market in ending its asset-purchase programme, backing the case for US interest rates to rise.

The Federal Open Market Committee noted “solid job gains and a lower unemployment rate” since its last gathering in September, while maintaining a commitment to keep borrowing costs low for a “considerable time,” according to a statement yesterday. The ringgit may be vulnerable to an outflow of funds as overseas investors own about 31 percent of Malaysian government bonds, compared with 18 percent for Thailand.

The ringgit’s decline is due to “the hawkish tone to the Fed statement yesterday,” said Michael Every, head of Asia Pacific financial-markets research at Rabobank International in Hong Kong. “The market is still slightly sceptical because on the one hand it is much more hawkish in terms of the overall tone but at the same time the Fed retained the phrase considerable period of time.”

The ringgit weakened 0.5 percent, the biggest decline in a month, to 3.2880 per dollar as of 9.53am in Kuala Lumpur, according to data compiled by Bloomberg. It earlier reached 3.2910, the lowest level since March 27, and has depreciated 0.2 percent in October.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell eight basis points, or 0.08 percentage point, to 6.47 percent.

The yield on Malaysia’s 4.181 percent sovereign bonds due July 2024 was little changed at 3.82 percent, data compiled by Bloomberg show. The rate fell 10 basis points this month. — Bloomberg