Malaysian Ringgit Posts Weekly Loss on Stocks Rout; Bonds Rally

By David Yong

Nov. 21 (Bloomberg) -- Malaysia's ringgit fell for a third straight week as Asian stocks declined on speculation a deepening global economic slump will prompt investors to sell emerging-market assets. Bonds advanced.

The currency dropped to a two-year low today as the MSCI Asia-Pacific Index of regional shares approached its lowest level since August 2003. The U.S, Japan and Singapore are all in recession, damping the outlook for Malaysian exports, more than a third of which are shipped to the three countries.

``Much of the ringgit weakness stems from the demand for dollars as a safe haven because of the declines in stocks and commodity prices,'' said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. ``You can expect regional central banks to prevent a faster pace of depreciation from destabilizing their economies.''

The ringgit fell 0.8 percent this week to 3.6205 per dollar as of 4:40 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency rose 0.1 percent today after reaching 3.6425, the weakest level since November 2006.

The cost of protecting Malaysia's sovereign debt against default rose to a three-week high yesterday, according to credit-default swap prices compiled by Bloomberg News. The Kuala Lumpur Composite Index has declined 2 percent this week, extending this year's drop to 40 percent slump.

Bonds Rally

Three-year notes rallied for a third week, pushing yields to the lowest since March, as slowing inflation and economic growth fuel expectations interest rates will be cut.

The yield on the 3.833 percent note due in September 2011 plunged 18 basis points this week to 3.41 percent, according to Bursa Malaysia Bhd. The price jumped 0.475, or 4.75 ringgit per 1,000 ringgit face amount, to 101.125.

Three-year yields dropped below Bank Negara Malaysia's overnight policy rate of 3.5 percent for the first time since May 22, according to Bloomberg data.

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