Malaysia’s Ringgit Rises to 3-Week High on Stimulus; Bonds Gain

By David Yong

March 18 (Bloomberg) -- Malaysia’s ringgit rose to a three- week high against the dollar on optimism economic stimulus packages at home and abroad will help break a global recession.

The currency strengthened after the Bank of Japan increased government bond purchases from banks to spur lending and the U.S. reported a pickup in homebuilding. Asian stocks rose for a fourth day as the World Bank said China’s economy shows “early signs” of stabilizing with support from state-led investment.

“The stock rally shows there’s been some easing on the risk-aversion front,” said Suresh Kumar Ramanathan, a rates and currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “There’s been too much cynicism and people are now more willing to give stimulus efforts a chance to work. It’s positive for the ringgit.”

The currency rose 0.2 percent to 3.6660 per dollar as of 12:34 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency earlier climbed as much as 0.6 percent to 3.6532, the strongest since Feb. 25.

Malaysia can afford the 60 billion ringgit ($16 billion) of additional spending announced on March 10 and the risk is “that we don’t do enough,” Deputy Prime Minister Najib Razak said in an editorial opinion in the Wall Street Journal Asia today.

The MSCI Asia Pacific Index rose for a fourth day, its longest winning streak since Jan. 5, after the Bank of Japan today said it will buy 1.8 trillion yen ($18.3 billion) of government debt each month, up from 1.4 trillion yen. The BOJ yesterday said it may provide as much as 1 trillion yen of subordinated loans to shore up banks capital. U.S. housing starts rose 22 percent in February from the previous month, the Commerce Department said yesterday.

Bonds Gain

Five-year notes gained, snapping two days of losses, on speculation yields near the highest in five months made the debt cheap. Three- and 10-year benchmark securities haven’t traded.

“We like the five-year because the yield and spread should compensate for the supply risk” to fund the stimulus program, said Soo Wang Wei, a bond analyst at OSK Investment Bank Bhd. in Kuala Lumpur. “They are oversold.”

The yield on the 5.094 percent note due in April 2014 fell three basis points to 3.87 percent, according to Bursa Malaysia Bhd. The price rose 0.11, or 1.1 ringgit per 1,000 ringgit face amount, to 105.61. A basis point is 0.01 percentage point.

Five-year bonds yielded 115 basis points more than three- year securities, according to data compiled by Bloomberg, compared with an average spread of 27 basis points in the past six months.

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