Ringgit sees longest weekly losses since 2005 on Fed taper bets

Business & Markets 2013
Written by Bloomberg
Friday, 13 December 2013 19:08
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13 Dec 2013 18:00
(Dec. 13): Malaysia’s ringgit fell for an eighth week, its longest losing streak
since November 2005, on speculation U.S. policy makers will curb stimulus
amid signs of a strengthening economy. Government bonds advanced.
U.S. retail sales rose 0.7 percent in November, the biggest gain in five months,
and exceeded the median forecast of economists for a 0.6 percent increase,
official data showed yesterday. Other reports in December showed a pick-up in
manufacturing and employment before next week’s Federal Open Market
Committee meeting. An Increase in household debt in Malaysia is a risk for the
local economy and the liabilities could be “problematic” if growth slows, Ritesh
Maheshwari, an analyst at Standard & Poor’s, said in a Dec. 11 teleconference.
“The focus on next week’s FOMC meeting, where we expect the Fed to start tapering, flowed through to Asian currencies,” said Khoon
Goh, a senior foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “Ringgit weakness simply
reflected this.”
The Malaysian currency retreated 0.1 percent this week and 0.2 percent today to 3.2358 per dollar in Kuala Lumpur, according to data
compiled by Bloomberg. One-month non- deliverable forwards dropped 0.7 percent from Dec. 6, the biggest five-day loss since Nov. 1,
and fell 0.2 percent today to 3.2380. That’s 0.1 percent weaker than the spot rate.
Trade Balance
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, declined nine basis points, or 0.09
percentage point, this week to 8.06 percent and rose five basis points today.
Malaysia, Southeast Asia’s third-biggest economy, posted a trade surplus of 8.2 billion ringgit ($2.5 billion) in October, compared with 8.66
billion ringgit the previous month, official data showed last week. The gap was 1 billion ringgit in April, the least since 1997.
The ringgit will appreciate to 3.18 within three months, supported by recent improvements in the trade balance, Goldman Sachs Group Inc.
analysts including Singapore-based Mark Tan wrote in a report yesterday.
The yield on the 3.48 percent sovereign notes due March 2023 declined seven basis points this week to 4.07 percent, according to data
compiled by Bloomberg, the biggest five-day drop since the period ended Oct. 25. It was little changed today.