KUALA LUMPUR: Goldman Sachs Asset Management LP boosted holdings of ringgit and the Philippine peso in recent weeks, betting the prospect of interest-rate increases will spur appreciation.
The ringgit will strengthen five per cent against the US dollar by year-end and an 8.1 per cent gain is likely for the peso, based on estimates given by Philip Moffitt, head of Asia-Pacific fixed-income at Goldman Sachs Asset, which oversees US$860 billion (RM2.8 trillion).
Benchmark rates in Malaysia and the Philippines will increase at least 25 basis points by the end of next year, according to the majority of economists in Bloomberg surveys.
"We expect interest rates to rise over the next year in Malaysia and the Philippines, and that's less likely in some other Southeast Asian economies such as Thailand,"Moffitt said in an interview on Tuesday. "We'll see a bounce in the two currencies."
The ringgit has led a rebound in Southeast Asian currencies since August 31 as the United States Federal Reserve (Fed) unexpectedly held off from reducing stimulus that fuelled demand for emerging market assets.
The region's currencies all sank in the prior four months, led by an 11 per cent slide in rupiah, as the Fed signalled plans to rein in its US$85 billion-a-month bond-buying programme.
Tapering of the programme is unlikely to start before December, and Southeast Asian assets are being boosted by Japanese demand for overseas investments, said Moffitt.
"Liquidity generation" in the US, euro region and Japan is the highest in two years, he added.
The ringgit climbed 1.7 per cent this month to 3.2060 per US dollar, the best performance among Asia's 11 most-traded currencies, according to data compiled by Bloomberg.
Barclays Plc raised its three-month forecast for the ringgit by 4.5 per cent to 3.15 in September on expectations global funds will boost holdings of the nation's bonds, Hamish Pepper, its currency strategist in Singapore, said in a September 27 interview.
Bank Negara Malaysia held interest rates at three per cent at a September 5 policy meeting and warned of increased uncertainties surrounding the domestic growth and inflation outlook.
Increases in consumer prices are likely to quicken as the government cuts subsidies, it said in a statement after the meeting.
The last move in borrowing costs was a 25-basis-point increase in May 2011. Bloomberg