Ringgit declines to three-year low on current-account concern

by **Cals** Tue 27 Aug 2013, 20:45

Ringgit declines to three-year low on current-account concern
Business & Markets 2013
Written by Bloomberg
Tuesday, 27 August 2013 18:48

27 Aug 2013 16:24

(Aug. 27): Malaysia’s ringgit fell to a three- year low and government bonds retreated on concern over the nation’s worsening current-account position.

The currency declined the most since July 31 after official data last week showed the surplus in the broadest measure of trade shrank 70 percent in the second quarter from the first. Fitch Ratings lowered its outlook on Malaysia to negative from stable last month, citing public debt levels. The Federal Reserve will begin to slow its bond purchases at its Sept. 17-18 meeting, according to 65 percent of economists in a Bloomberg News survey.

“We’re in an environment where investors are not looking kindly on countries with current-account deficits, or deteriorating surpluses,” said Khoon Goh, a strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “We’re seeing capital being pulled out of emerging markets.”

The ringgit slipped 0.7 percent to 3.3312 per dollar as of 4:14 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency touched 3.3348, the weakest level since June 2010. One-month implied volatility, a measure of expected moves in exchange rates used to price options, dropped four basis points, or 0.04 percentage point, to 9.72 percent.

Investors pulled $1.3 billion from emerging-market debt funds in the week ended Aug. 21 after withdrawing $834.2 million in the previous week, according to EPFR Global data.

The central bank wants “orderly market conditions” for the ringgit and will intervene if movements are “highly disruptive and disorderly”, Governor Zeti Akhtar Aziz said today.

Malaysia’s current account surplus narrowed to 2.6 billion ringgit ($780 million) in the second quarter from 8.7 billion ringgit in the previous three months, the closest the country has come to recording a deficit, according to data compiled by Bloomberg going back to 1999.

Oversea-Chinese Banking Corp. lowered its forecast for Malaysia’s 2013 economic growth to 4.7 percent from the previous projection of 4.9 percent to 5 percent, an Aug. 26 research note showed.

The yield on the 3.26 percent sovereign notes due March 2018 advanced one basis point to 3.64 percent, according to data compiled by Bloomberg.