Ringgit reverses losses on bond demand

Malaysia’s ringgit rose for a third day, reversing earlier losses for this quarter, as improving sentiment toward emerging-market assets attracted global investors to the nation’s debt.

Greek lawmakers passed budget-austerity measures yesterday in the first step to win more financial aid from the European Union and avert the region’s first sovereign default. Demand rose at Malaysia’s government bond sales this week on speculation foreign investors added to holdings that are at a record.

“It’s a relief rally from Greece’s decision that is supporting Asian currencies,” said D. Sivadass, foreign- exchange forwards trader at EON Capital Bhd. in Kuala Lumpur. “In the short term, this could stem the recent fund outflows” from stock markets, he said.

The ringgit gained 0.4 per cent to 3.0201 per dollar as of 10:54 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency was headed for a 0.8 per cent gain this week and rose 0.2 per cent this quarter. It may reach 3 per dollar next week, Sivadass said.

Malaysia sold RM2 billion (US$662 million) of 20-year local-currency bonds yesterday, with demand outstripping supply by 2.52 times, versus 1.67 times at the previous sale in April 2010. The government also completed a US$2 billion global bond offering this week, receiving orders for more than US$9 billion of the Islamic notes.

Global funds held a record RM83 billion of government bonds in April, up from RM73.8 billion at the end of 2010, according to data published by Bank Negara Malaysia. The central bank will report their holdings for May later today.

Five-year notes gained, keeping yields near a one-week low. The yield on the 4.262 per cent securities due September 2016 fell one basis point, or 0.01 percentage point, to 3.50 per cent, according to Bursa Malaysia. - Bloomberg