The currency was Asia’s best performer after Indonesia’s rupiah this week on speculation the central bank will increase benchmark borrowing costs from 3 per cent on July 10. The ringgit briefly pared today’s gain after data showed the trade surplus narrowed as imports rose more than economists forecast.

“The ringgit is firmer than other Asian currencies because of expectations of an interest-rate hike,” Wong Chee Seng, a currency strategist at AmBank Group in Kuala Lumpur, said before the trade figures were issued. “The uptrend in exports is also supportive of the Malaysian currency.”

The ringgit strengthened 0.3 per cent to 3.1860 per dollar in Kuala Lumpur and was up 0.9 per cent for the week, data compiled by Bloomberg show. It rose as much as 0.5 per cent earlier to 3.1805, the strongest since November 20.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, advanced 16 basis points, or 0.16 percentage point, to 4.86 per cent this week and was little changed today.

Eight of 10 economists surveyed by Bloomberg predict a 25 basis point increase in the policy rate next week. One-year interest-rate swaps have climbed two basis points in the past month to 3.67 per cent.

Bond holdings

The trade surplus narrowed to 5.72 billion ringgit (US$1.8 billion) in May from the revised 8.74 billion ringgit in April, today’s report showed. That was less than the median forecast in a Bloomberg survey for an 8.1 billion ringgit excess.

Exports rose 16.3 per cent from a year earlier, following a revised 18.7 per cent increase in April. That was more than the 15.2 per cent gain predicted by economists. Imports surged 11.9 per cent, beating April’s 5 per cent jump and the forecast 7.7 per cent expansion.

Global funds boosted ownership of Malaysian government and corporate debt by 5.7 per cent to a record 249.5 billion ringgit in May, the central bank reported this week.

Ten-year government bonds were little changed today, with the yield on the 4.181 per cent notes maturing in July 2024 at 4.02 per cent, according to data compiled by Bloomberg. The rate dropped three basis points for the week. — Bloomberg