The ringgit posted the longest run of monthly gains since November 2012 after a pick-up in economic growth spurred bets the central bank will increase interest rates for a second time this year.

The ringgit was the best performer in August among 24 emerging-market currencies tracked by Bloomberg as reports this month showed Malaysia’s second-quarter economic expansion and current-account surplus beat economists’ estimates.

Bank Negara, which raised borrowing costs in July for the first time in more than three years, may do so again in September, according to Oversea-Chinese Banking Corp.

“After the good data, the market is starting to price in an earlier rate hike,” said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. “That provided support for the ringgit.” The currency strengthened 1.4% in August, a fourth month of gains, to 3.1520 per dollar in Kuala Lumpur, according to data compiled by


The ringgit fell 0.1% on Friday, paring its weekly advance to 0.3%.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 35 basis points, or 0.35 percentage point, since July 31 to 5.59%.

Malaysia’s US $312 bil (RM 983 bil) economy expanded 6.4% in the second quarter from a year earlier, the fastest pace since the final three months of 2012, according to official figures released Aug 15.

A separate report showed the nation recorded a current-account surplus of RM16bil (US$5.1bil), higher than the median estimate of economists for an excess of RM11.4bil.

Bank Negara, which increased the overnight policy rate by 25 basis points to 3.25% on July 10, will probably raise it to 3.50% as growth is likely to remain healthy, Wellian Wiranto, a Singapore-based economist at OCBC, wrote in a report.

The yield on Malaysia’s 4.181% sovereign bonds due July 2024 climbed four basis points in August, the first monthly advance this year, to 3.93% , data compiled by Bloomberg showed.

Source: The Star 1 September 2014

Posted on 2014-09-02 11:57:52