Malaysia’s Ringgit Plunges the Most in Six Weeks on Bets over U.S. Interest Rate Hike

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Malaysia’s Ringgit Plunges the Most in Six Weeks on Bets over U.S. Interest Rate HikeThe Malaysian ringgit fell by the highest margin in six weeks while the U.S. dollar declined after data hinted that Federal Reserve may hike interest rates this year.

The ringgit declined 0.5 percent to trade at 3.2283 a dollar in Kuala Lumpur, ending a two-day winning streak. This was the steepest decline since April 22. The ringgit’s one-month implied volatility, which measures the expected shifts in the exchange rate used to assign prices to options, rose  0.16 percentage point, or 16 basis points to 5.52 percent.

“The U.S. dollar is stronger because of the better data such as durable goods and more positive comments from Fed officials,” Saktiandi Supaat, a Singapore-based head of FX research at Malayan Banking told Bloomberg. “With the Chinese market closed for a public holiday, investors also opted to stay with the safe-haven greenback.”

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The Philadelphia Federal Reserve President Charles Plosser hinted that borrowing costs may be hiked sooner than anticipated after data showed that inflation rose. The Bloomberg U.S. Dollar Spot Index, which monitors the dollar against 10 major peers, halted a two-day decline after last week’s data revealed that durable goods orders in the U.S. were in line with economists’ predictions.

The Federal Reserve’s personal consumption expenditures index, its preferred measure of inflation, surged to 1.6 percent in April. This is the quickest growth since 2012. U.S. durable goods orders accelerated 0.8 percent in April, beating the economists’ prediction of a 0.7 percent decline.

Analysts in a Bloomberg survey expect Malaysian exports to grow by 9.1 percent in April, up from 8.4 percent in March. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com