Ringgit halts 5-day rally

by **hlk** Wed 01 Aug 2012, 11:34

KUALA LUMPUR: Malaysia’s ringgit halted a five-day rally as investors waited to see if the Federal Reserve and the European Central Bank will take new measures to stimulate their economies.

The ECB’s Governing Council will convene tomorrow to find ways to tackle the region’s debt crisis after official data yesterday showed the jobless rate in the euro area reached the highest level on record. The Fed will probably forgo announcing a third round of large-scale asset purchases after it concludes a two-day meeting today, and is more likely to wait until September to unveil plans to buy US$600 billion in housing and government debt, according to the median estimate of economists in a Bloomberg News survey.

“The market is fixated on the Fed and ECB meetings,” said Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank Ltd. “I think expectations have gotten well ahead of anything the ECB intends to deliver at this meeting.”
The ringgit declined 0.3 percent to 3.1245 per dollar as of 9:07 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange- rate swings used to price options, held at 7 percent.

Malaysia is vulnerable to a sudden change in the flow of investment funds due to the high level of foreign participation in government bonds, Standard & Poor’s said in a July 27 statement as it affirmed its A- long term and A-2 short-term foreign currency sovereign-credit ratings for the country.

Government bonds advanced yesterday. The yield on the 3.58 per cent notes due September 2018 fell one basis point, or 0.01 percentage point, to 3.32 per cent, according to Bursa Malaysia.

As at 9.24 am, the local unit was traded at 3.1235/1265 against the greenback compared with 3.1505/1525 at 5 pm Tuesday.

Against other regional currencies, the ringgit advanced against the Singapore dollar to 2.5056/5100 from 2.5252/5289 yesterday and strengthened against the yen to 4.0055/0104 from 4.0262/0293 Tuesday.

The ringgit was also up against the British pound to 4.8911/8967 from 4.9444/9485 and against the euro to 3.8366/8409 from 3.8676/8706 yesterday. -- BERNAMA