Ringgit has biggest weekly loss since June
Malaysia’s ringgit had its biggest weekly drop in three months as concern over US budget talks that risk a government shutdown sapped demand for emerging- market assets. Government bonds fell.
The US Senate plans to vote today on a bill, three days before federal spending authority runs out and as the country approaches its borrowing limit. Malaysia is seeking RM14.1 billion in extra spending this year to pay civil servants’ salaries, according to a September 23 report in the local Edge newspaper.
"People are showing some concern about the US debt ceiling," said Hamish Pepper, a currency strategist at Barclays Plc in Singapore. "The market concern has moved on from the prospect of foreigners withdrawing from Malaysian government securities to the fiscal front."
The ringgit declined 1.9 per cent this week and 0.3 per cent today to 3.2251 per dollar as of 4.37pm in Kuala Lumpur, according to data compiled by Bloomberg. Its five-day drop is the biggest since the period ended June 21. One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell 35 basis points, or 0.35 percentage point, today to 10.22 per cent.
Malaysia has run a budget shortfall since 1998 and the government estimates that the gap will be four per cent of gross domestic product this year compared with 4.5 per cent in 2012.
The ringgit and Thailand’s baht are likely to underperform the peso as the Philippines’ current-account surplus remains "solid" at around three per cent of GDP due to steady remittances, Goldman Sachs Group Inc economist Fiona Lake wrote in a note yesterday.
The yield on Malaysia’s 3.26 per cent bonds due March 2018 climbed 13 basis points since September 20 to 3.57 per cent, according to data compiled by Bloomberg. The rate dropped one basis point today.
The government today sold RM2.5 billion of notes maturing September 2043, its first 30-year debt issuance, at 4.935 per cent, according to central bank data. The bid-to-cover ratio of 2.44 times compares with 1.62 for the debut 20-year Islamic notes sold by Bank Negara Malaysia last month on behalf of the treasury.-- Bloomberg