Ring­git leads Asian cur­rency losses

The Sun (Malaysia) - - SPEAK UP -

SIN­GA­PORE: The ring­git hit a near 10month low yes­ter­day with in­creas­ing fears of cap­i­tal con­trols, while most other emerg­ing Asian cur­ren­cies eased ahead of US Fed­eral Re­serve chair Janet Yellen’s tes­ti­mony later in the day.

China’s yuan bucked the trend in re­gional cur­ren­cies de­spite a weaker cen­tral bank guid­ance rate as large lo­cal banks bought the cur­rency in an ap­par­ent ef­fort to curb its slump.

The ring­git ex­tended losses by more than 1% to hit a near 10-month low as con­cerns grew over po­ten­tial cap­i­tal con­trols, hurt­ing gov­ern­ment bonds. The ring­git fell 1.1% to 4.3920 per dol­lar, its weak­est since Jan 20. Malaysia’s gov­ern­ment bond prices slid with the 10-year yield hit­ting 4.227%, the high­est since Jan 11.

That came af­ter Bank Ne­gara Malaysia (BNM), the cen­tral bank, de­manded for­eign banks make a writ­ten com­mit­ment to stop trad­ing off­shore non-de­liv­er­able for­wards in its lat­est move to pro­tect a weak­en­ing cur­rency, bank­ing sources said.

“In­vestors grew more con­cerned over BNM tight­en­ing trad­ing rules. We can­not rule out the pos­si­bil­ity of cap­i­tal con­trols, al­though we don’t need to worry about that for now,” said Qi Gao, a for­eign ex­change strate­gist with Sco­tia­bank here.

“Con­tin­ued dol­lar strength trig­gered cap­i­tal ex­o­dus too. If Yellen sounds hawk­ish tonight, the ring­git’s weak­ness will ac­cel­er­ate.”

The ring­git could weaken past 4.40 per dol­lar and head to 4.50 by the yearend, he added.

Among other Asian cur­ren­cies, South Korea’s won hit a near five-month low on eq­uity out­flows. The won lost 0.8% to 1,178.5 per dol­lar, its weak­est since June 28.

For­eign in­vestors were set to ex­tend their sell­ing spree in the main stock mar­ket to a fifth straight ses­sion. South Korean bonds are also seen vul­ner­a­ble.

The Sin­ga­pore dol­lar hov­ered around a 9 -month trough as dis­ap­point­ing Oc­to­ber ex­ports data raised risks of a re­ces­sion and the odds for mon­e­tary pol­icy eas­ing.

In Wash­ing­ton later yes­ter­day, Yellen said an in­ter­est rate in­crease likely will be ap­pro­pri­ate “rel­a­tively soon” as long as there is fur­ther ev­i­dence of progress in the econ­omy.

How­ever, she said the Fed ex­pects it will only have to raise rates grad­u­ally.

Yellen noted that labour mar­ket con­di­tions have im­proved and eco­nomic growth “has picked up from the mod­est pace seen in the first half of this year”. – Reuters, AFP


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