Malaysian Ringgit Rises to 1-Month High on Fed Plan; Bonds Gain

By David Yong

March 19 (Bloomberg) -- Malaysia’s ringgit rose to the highest in a month on speculation U.S. efforts to stem a deeper global recession will buoy demand for emerging-market assets. Bonds advanced.

The currency ended a two-day slide against the dollar after the Federal Reserve yesterday announced plans to buy company and government bonds to keep borrowing costs down in the world’s biggest economy. The MSCI Asia Pacific Index of regional stocks rallied for a fifth day, its longest winning run since Jan. 5.

“The Fed measures are causing bond yields to fall and weaken demand for the dollar as a safe haven,” said Hasdi Mamat, a currency trader at Bank Muamalat Malaysia Bhd. in Kuala Lumpur. “This will translate into much better appetite for Asian currencies.”

The currency rose 0.6 percent to 3.6600 per dollar as of 11:35 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It earlier climbed to 3.6415, the strongest since Feb. 18. Sustained buying may strengthen the ringgit to about 3.6400 in the weeks ahead, he said.

U.S. 10-year yields plunged yesterday by the most since 1962 after the Fed agreed to buy $300 billion of Treasury bonds and step up purchases of mortgage debt to help pull the economy out of a recession.

Non-deliverable forwards signal traders are betting the ringgit will weaken 0.9 percent to 3.6918 in three months, compared with expectations for a rate of 3.7120 yesterday. Forwards are contracts in which assets are bought and sold at current prices for delivery at a future specified date.

Bonds Rise

Five-year government bonds gained for a second day, sending yields to the lowest in more than a week. Three- and 10-year bonds were little changed.

The yield on the 5.094 percent note due April 2014 fell 12 basis points to 3.76 percent, according to Bursa Malaysia Bhd. The price rose 0.55, or 5.5 ringgit per 1,000 ringgit face amount, to 106.15. A basis point is 0.01 percentage point.

The government has raised 20 billion ringgit ($5.5 billion) from seven debt offerings so far this year, the busiest first- quarter since at least 1999. The finance ministry is scheduled to sell more of current 10-year benchmark notes later this month, according to its auction calendar.

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