KUALA LUMPUR, Sept 27 — Malaysia’s ringgit was poised for its biggest weekly drop in three months as concern over US budget talks that risk a government shutdown sapped demand for emerging-market assets. Government bonds fell.
The US Senate plans to vote today on a spending bill, three days before federal spending authority runs out and as the country approaches its borrowing limit. Malaysia is seeking RM14.1 billion (US$4.4 billion) in extra spending this year to pay civil servants’ salaries, according to a September 23 report in the local Edge newspaper.
“People are showing some concern about the US debt ceiling,” said Hamish Pepper, a currency strategist at Barclays Plc in Singapore. “The market concern has moved on from the prospect of foreigners withdrawing from Malaysian government securities to the fiscal front.”
The ringgit declined 1.8 per cent this week and 0.3 per cent today to 3.2238 per dollar as of 9:58am in Kuala Lumpur, according to data compiled by Bloomberg. Its five-day drop is the biggest since the period ended June 21. One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell 33 basis points to 10.25 per cent.
The yield on Malaysia’s 3.26 per cent bonds due March 2018 climbed 16 basis points, or 0.16 percentage point, since Sept. 20 to 3.60 per cent, according to data compiled by Bloomberg. The rate advanced two basis points today.
The government will sell 2.5 billion ringgit of 30-year bonds today, the first sale of notes of that tenor. Pre-market trading yesterday showed bid to offer yields were 4.35 per cent to 4.75 per cent, said Michael Chang, head of fixed income at MCIS Zurich Insurance Bhd. in Kuala Lumpur. — Bloomberg
