Malaysia’s Ringgit Advances to Eight-Month High on Interest Rate Speculation

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Malaysia’s Ringgit Advances to Eight-Month High on Interest Rate SpeculationThe Malaysian ringgit rose to its highest level in eight months as investors speculated that the central bank will hike interest rates for the first time in three years this week.

Most analysts surveyed by Bloomberg expect the Bank Negara Malaysia to increase the benchmark rate to 3.25 percent from 3 percent when it meets on July 10.

The ringgit rose 0.6 percent, the most in two weeks, to trade at 3.1712 per dollar in Malaysia. The currency had earlier touched 3.1685, the highest level since November 1. The ringgit’s one-month implied volatility, which measures the expected shifts in the exchange rate used to assign price to options, plunged 0.10 percentage point or 10 basis points to 4.88 percent.

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“The ringgit continues to benefit from expectations of a Bank Negara rate hike on Thursday,” Khoon Goh, a Singapore-based currency strategist at Australia & New Zealand Banking Group Ltd told Bloomberg. “The market’s fully pricing in a hike this Thursday, and one more by end of the year.”

The ringgit has rallied 1.3 percent over the past month, making it the third-best performer among the 24 emerging-economy currencies monitored by Bloomberg after the Indonesia rupiah and the Colombian peso.

Most analysts expect the central bank to increase interest rates after consumer price indexes surged 3.5 percent in March and in February, the quickest pace in nearly three years. Inflation fell to 3.2 percent in May, compared with 3.4 percent a month ago. June’s data is expected to be released on July 16.

The yield on the 3-year sovereign bonds, which has the shortest maturity period in the country and is most sensitive to rate changes, accelerated to 3.52 percent. 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