Malaysian Ringgit’s Volatility Jumps on Growing Tensions in Ukraine

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Malaysian Ringgit’s Volatility Jumps on Growing Tensions in UkraineA gauge of expected fluctuations in Malaysia’s ringgit surged the sixth day due to rising tensions in Ukraine and speculation the Federal Reserve will raise interest rates, reducing demand for assets from emerging-markets.

“There are renewed concerns in Ukraine and that could be the key reason for the dollar strengthening against the ringgit,” Ho Woei Chen, a Singapore-based economist at United Overseas Bank Ltd., told Bloomberg News. “There are no new insights into the timeline for the Fed’s eventual rate normalization cycle.”

The ringgit’s one month implied volatility, which measures the expected swings in the exchange rate used to set prices to options, surged 15 basis points or 0.15 percentage point to 5.90 percent at 5:06 p.m. Kuala Lumpur time. This was the fastest increase since Aug. 12. The currency fell 0.1 percent to trade at 3.1630 per U.S. dollar.

The ringgit fell ahead of tomorrow’s peace talks between Ukrainian and Russian leaders after the NATO decried the buildup of forces over the weekend. On Aug. 22, Federal Reserve Chair Janet Yellen told economists and central bankers in Jackson Hole, Wyoming that while some slack is evident in the U.S. labor market, borrowing costs may be hike sooner than anticipated.

The yield on the nation’s 4.181 percent sovereign bonds that mature in July 2024 advanced 0.01 percentage point or one basis point, to 3.97 percent, the most since July 15. Most analysts expect the central bank to increase the target interest rate soon owing to impressive economic performance. A report released on Aug. 15 indicated that Malaysia’s economy jumped 6.4 percent in the year through the second quarter. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com