Asia FX Ringgit leads Asia FX losses ahead of Malaysia FX reserves, US job data

by **Cals** Sat 08 Aug 2015, 00:07

Asia FX
Ringgit leads Asia FX losses ahead of Malaysia FX reserves, US job data

SINGAPORE (Aug 7): The ringgit hit another pre-peg 17-year low on Friday, hours before the release of Malaysian foreign-exchange reserves data that will be closely watched.
If the reserves drop further, that could increase concern about how much ammunition the central bank has to defend the currency.
Most emerging Asian currencies eased on Friday, and will have weekly losses. Investors were awaiting U.S. jobs data that might cement expectations the Federal Reserve will raise interest rates next month.
The ringgit fell as much as 0.6 percent to 3.9280 per dollar, its weakest since Sept. 2, 1998, the day before the government pegged it at 3.8000 per dollar to put a floor under the currency during the Asian financial crisis. Malaysia lifted the peg in 2005.
Malaysia's government bond prices continued to fall amid declining confidence among foreign investors due to political fallout and low commodity prices. The five-year bond yield rose to 3.742 percent, its highest since Feb. 17, while the ten-year yield advanced to a near two-month peak of 4.150 percent.
Caution increased over possible intervention by the central bank to bolster the worst-performing Asian currency this year. The ringgit has been hurt by uncertainty about the future of Prime Minister Najib Razak amid corruption allegations circling an indebted state fund, 1MDB.
However, investors doubt how heavily Bank Negara Malaysia could intervene as the country's international reserves already lost $5 billion to $100.5 billion in the first half of July. The central bank will release the reserve data for the rest of July at 6 pm (1000 GMT).
"BNM is apt to stick to its previous intervention tactics of slowing the rate of depreciation when capital outflows or speculative pressures are evident, but if reserves fall toward USD 90 billion they are likely to 'let it go'," said analysts for Societe Generale in a client note.
Societe Generale revised its ringgit forecast for the third quarter to 4.1000 from 3.8000.
The Malaysian currency has lost nearly 11 percent against the dollar this year as falling commodity prices spurred worries about exports from the country that supplies liquefied natural gas and palm oil.
RINGGIT'S WORST WEEK IN 8 MONTHS
So far this week, the ringgit has fallen 2.6 percent, which would be its largest weekly loss since December 2014,Thomson Reuters data showed.
Most emerging Asian currencies were set to suffer weekly losses on growing expectations of a U.S. interest hike in September after upbeat U.S. economic data and hawkish comments by a Fed official.
The prospects, along with volatile China's stocks and a commodity rout, dragged foreign money out of emerging markets including Asia. Most regional bond yields also rose.
Singapore's dollar has slid 1.0 percent this week on growing concerns over a sluggish economy. The city-state's economy in the second quarter probably contracted 4.6 percent from the previous quarter on an annualised basis, in line with the government's earlier estimate, a Reuters poll showed.
The Philippine peso has eased 0.1 percent for the week, while Indonesia's rupiah and Thailand's baht have edged down.
The immediate focus is U.S. July nonfarm payrolls data later in the day. Economists expect the U.S. employment report to show 223,000 jobs were created in July.
A solid number will definitely hurt emerging Asian currencies, but a weak figure could support regional units for a short time, some analysts said.
Expectations of the Fed's liftoff and optimism on the U.S. economic recovery have been priced into the dollar's recent strength, they added.
"A disappointment may spur some controversies on a September hike and a short-term rebound in Asian currencies," said Yuna Park, a currency and bond analyst at Dongbu Securities in Seoul.
Preparing such possibilities, some emerging Asian currencies rose this week. The Indian rupee has advanced 0.5 percent and the South Korean won gained 0.2 percent.
But such rebounds are unlikely last long as the U.S. central bank is expected to raise borrowing costs later this year, Park added.