Ringgit Has biggest weekly loss since June on U.S. debt risk

by **Cals** Fri 27 Sep 2013, 22:51

Ringgit Has biggest weekly loss since June on U.S. debt risk

Business & Markets 2013

Written by Bloomberg

Friday, 27 September 2013 19:07

(Sept. 27): Malaysia’s ringgit had its biggest weekly drop in three months as concern over U.S. budget talks that risk a government shutdown sapped demand for emerging- market assets. Government bonds fell.
The U.S. Senate plans to vote today on a bill, three days before federal spending authority runs out and as the country approaches its borrowing limit. Malaysia is seeking 14.1 billion ringgit ($4.4 billion) in extra spending this year to pay civil servants’ salaries, according to a Sept. 23 report in the local Edge newspaper.
“People are showing some concern about the U.S. 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 1.9 percent this week and 0.3 percent today to 3.2251 per dollar as of 4:37 p.m. 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 35 basis points, or 0.35 percentage point, today to 10.22 percent.
Malaysia has run a budget shortfall since 1998 and the government estimates that the gap will be 4 percent of gross domestic product this year compared with 4.5 percent in 2012.
The ringgit and Thailand’s baht are likely to underperform the peso as the Philippines’ current-account surplus remains “solid” at around 3 percent of GDP due to steady remittances, Goldman Sachs Group Inc economist Fiona Lake wrote in a note yesterday.