Malaysia's Ringgit Halts 8-Day Loss as Slump Deemed Excessive

By David Yong

Aug. 13 (Bloomberg) -- Malaysia's ringgit rose from the lowest this year as a technical indicator watched by traders showed the currency's decline this month was excessive.

The ringgit ended an eight-day losing streak, its longest since its peg to the dollar was scrapped in July 2005, on speculation Asian central banks bought their currencies to help curb inflation. The currency also gained as the dollar fell yesterday as JPMorgan Chase & Co. reported a $1.5 billion writedown in mortgage-backed securities, suggesting the U.S. credit crisis may worsen.

``The ringgit's decline is overdone and not justified given its fundamental outlook,'' said Yeah Kim Leng, chief economist in Kuala Lumpur at RAM Holdings Bhd., the nation's biggest rating company. ``The subprime issue will linger in the U.S. and Asia's economies are still going to hold up quite well.''

The ringgit rose 0.3 percent to 3.3140 per dollar as of 9:45 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency yesterday reached 3.3372, the lowest since Dec. 28.

The dollar-ringgit's 14-day relative strength index, a comparison of the magnitude of gains and losses, reached 76 today, according to data compiled by Bloomberg. A level below 30 or above 70 signals a reversal may occur.

JPMorgan's additional writedowns took the industry tally past $500 billion since the subprime-mortgage crisis began last year. U.S. retail sales may have dropped 0.1 percent last month, after a 0.1 percent gain in June, according to a Bloomberg News survey before a Commerce Department report today.

``Central banks do have the interest in reducing the more extreme foreign-exchange volatility, especially when it contributes to inflation,'' said Daniel Hui, a currency strategist at HSBC Holdings Plc in Hong Kong. ``More recently, we might have seen a less vigorous action to slow the currency weakness as inflation concerns have eased.''

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.