KUALA LUMPUR, July 3 — Malaysia’s ringgit fell toward a three-year low on concern slowing economic growth in China will hurt demand from the Southeast Asian nation’s second-biggest export market. Government bonds advanced.
The Shanghai Stock Exchange Composite Index dropped as much as 2.1 per cent today after a report showed China’s non-manufacturing purchasing managers’ index fell to 53.9 in June, the lowest level since September. There will be limited upside for the ringgit in the next six months due to an increasing possibility of higher capital outflows, according to a July 1 report from Malaysian Rating Corp.
“There’s a bit of risk aversion related to China,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. “It’s been a persistent concern that growth in China has been unable to gather momentum.”
The ringgit weakened 0.6 per cent, its third day of losses, to 3.1875 per dollar as of 4:30 pm in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.1925, approaching the 3.2222 level reached on June 24, which was the weakest since July 22, 2010. One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell four basis points, or 0.04 percentage point, to 8.75 per cent.
The Malaysian currency may drop to 3.20 per dollar this week on speculation the Federal Reserve will pare its debt purchases as the US economy improves, according to Gundy Cahyadi, economist at Oversea-Chinese Banking Corp. in Singapore.
The yield on the 3.26 per cent sovereign bonds due March 2018 declined two basis points to 3.37 per cent, according to data compiled by Bloomberg. — Bloomberg
