KUALA LUMPUR, Sept 10 — Malaysia’s ringgit completed its biggest two-day drop since January on speculation a stronger US economy will support the case for the Federal Reserve to raise interest rates next year.
Fed officials will review monetary policy on Sept 16-17 after reports this month showed US manufacturing and services growth in August exceeded economists’ estimates, while payrolls posted the smallest increase this year. Malaysian exports increased at the slowest pace in 13 months in July, official data released last week showed. The Southeast Asian nation’s central bank raised borrowing costs in July for the first time in more than three years and meets next on Sept 18.
“US data recently has been strong with the exception of last week’s non-farm payroll numbers,” said Divya Devesh, an analyst at Standard Chartered Plc in Singapore. “There are some questions over whether Bank Negara would be hiking rates next week. The recent export numbers weren’t very strong.”
The ringgit declined 0.9 per cent since Sept 8 to 3.2038 per dollar as of 4.59pm in Kuala Lumpur, according to data compiled by Bloomberg. That was the biggest two-day drop since Jan 16. The currency fell 0.3 per cent today, paring this quarter’s advance to 0.2 per cent.
The Bloomberg Dollar Spot Index rose 0.3 per cent, a third day of gains, to a 14-month high. Low volatility across financial markets may signal investors are underestimating how quickly the US central bank will raise interest rates, according to a Sept 8 report by researchers at the San Francisco Fed.
Trade surplus
Malaysian exports increased 0.6 per cent in July from a year earlier, missing the median estimate of economists for a 5.3 per cent gain, the government reported on Sept 5. The nation’s trade surplus narrowed to RM3.64 billion, the smallest in a year.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 42 basis points, or 0.42 percentage point, today to 6.82 per cent. It earlier reached 6.83 per cent, the highest since April 3.
The yield on Malaysia’s 4.181 per cent sovereign bonds due July 2024 climbed two basis points to 4.01 per cent, the highest in two months, data compiled by Bloomberg show. — Bloomberg
