Malaysian Ringgit Climbs From Near Two-Year Low as Stocks Rally

By David Yong

Nov. 25 (Bloomberg) -- Malaysia’s ringgit climbed from near a two-year low on speculation a regional stock-market rally will boost investors’ demand for emerging-market assets.

The currency gained the most in three weeks as shares in Australia, Japan and South Korea advanced more than 4 percent after a two-day rally in the Standard & Poor’s 500 Index. Malaysia’s central bank cut its benchmark interest rate for the first time since 2003 after financial markets shut yesterday.

“The ringgit is gaining because investors are unwinding safe-haven trades along with the equity rally,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “The rate cut will hopefully stimulate lending, but the signal to the market is that more rate cuts cannot be ruled out going forward.”

The ringgit gained 0.4 percent to 3.6175 versus the dollar as of 8:39 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency touched 3.6425 on Nov. 21, the weakest level since November 2006.

Bank Negara Malaysia reduced its overnight policy rate to 3.25 percent from 3.5 percent, citing weakness in exports and the labor market and a slump in local share prices. Policy makers last lowered borrowing costs in May 2003 when the benchmark was known as the intervention rate.

The central bank also cut the reserve requirement, or interest-free money banks must set aside at the central bank, to 3.5 percent from 4 percent of assets effective Dec. 1 to reduce borrowing costs.

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