Malaysia’s Ringgit Strengthens as Stocks Advance; Bonds Decline

By Lilian Karunungan

March 16 (Bloomberg) -- Malaysia’s ringgit rose the most in three weeks on speculation a global stocks rally will damp risk aversion and help revive demand for emerging-market assets. Bonds fell.

The currency also advanced to a two-week high after Second Finance Minister Nor Mohamed Yakcop said the government’s 60 billion ringgit ($16.3 billion) stimulus plan may add as much as 3 percent to gross domestic product, the Edge weekly reported at the weekend. Without the spending, Malaysia’s economy might shrink by at least 2.5 percent, Nor was cited as saying.

“The ringgit is stronger because there are expectations that risk appetite will diffuse from Wall Street to Asia,” said Enrico Tanuwidjaja, an economist at Oversea-Chinese Banking Corp. in Singapore.

The ringgit strengthened 0.9 percent to 3.6715 per dollar as of 4:53 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency, which has dropped 5.6 percent this year, reached 3.6700, the highest since Feb. 27.

The Standard & Poor’s 500 Index of U.S. shares and the MSCI Asia-Pacific Index of regional equities last week posted their biggest gains of the year after Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp. said they were profitable in the first two months, fueling optimism a global financial crisis will ease. The MSCI index rose 2 percent today.

Non-deliverable forwards contracts signal traders are betting the ringgit will weaken 0.4 percent to 3.6875 in a month, compared with expectations for a rate of 3.7240 on March 13. Forwards are agreements in which assets are bought and sold at current prices for delivery at a future specified time and date.

Three-year government bonds fell for a second day, with the yield at its highest in three weeks.

The yield on the 3.833 percent note due in September 2011 rose seven basis points to 2.84 percent, according to Bursa Malaysia Bhd. The price dropped 0.180, or 1.80 ringgit per 1,000 ringgit face amount, to 102.400. A basis point is 0.01 percentage point.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.