Malaysian Ringgit Rises to 5-Week High as U.S. Plans Spur Rally

By David Yong

March 24 (Bloomberg) -- Malaysia’s ringgit rose to the strongest level in five weeks on speculation U.S. efforts to remove toxic assets from banks will help unlock credit and spur demand for emerging-market assets.

The currency advanced for a fourth day against the dollar after the U.S. Treasury announced it will finance as much as $1 trillion in purchases of banks’ distressed assets to revive the financial industry without having to nationalize lenders. The MSCI Asia Pacific Index of regional stocks climbed for a second day to reach the highest since Feb. 10.

“There’s optimism in the stock and currency market arising from the U.S. measures,” said Lim Shyang Fuh, head of treasury at ECM Libra Investment Bank Bhd. in Kuala Lumpur. “Risk aversion has clearly subsided.”

The ringgit gained 0.4 percent to 3.6252 per dollar as of 10:12 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency climbed to 3.6225, the strongest since Feb. 17.

Investors put $350 million into emerging-market equity funds in the week ended March 18, a second week of inflows, as risk appetite improved, according to Cambridge, Massachusetts-based EPFR Global, a research company that tracks investor funds.

Seven of Asia’s 10 most-traded currencies rose against the greenback. Treasury Secretary Timothy Geithner yesterday said the U.S. will use $75 billion to $100 billion of its bank-rescue funds to buy illiquid real-estate assets. The Public-Private Investment Program will also rely on Federal Reserve financing and Federal Deposit Insurance Corp. debt guarantees.

Non-deliverable forwards signal traders are betting the ringgit will weaken 0.8 percent to 3.6570 in three months, compared with expectations for a rate of 3.6730 yesterday. The currency is down 4.8 percent this year, poised for a fourth quarter of losses. Forwards are contracts in which assets are bought and sold at current prices for delivery at a future specified date.

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