Ringgit declines most in Asia as Fed seen paring debt purchases

(Bloomberg) – Malaysia’s ringgit dropped the most in Asia on speculation that outflows will accelerate on prospects of a reduction in US monetary stimulus this month. Government bonds retreated.

American employers added 180,000 jobs in August, after an increase of 162,000 in July, a Bloomberg survey showed before a September 6 report. The Federal Open Market Committee meets September 17-18 to review the policy known as quantitative easing. Global funds cut holdings of Malaysian government and corporate debt in July by the most since September 2011, central bank data show. The Obama administration is on a campaign to persuade US lawmakers that a military strike against Syria is justified.

“Markets think non-farm payrolls would affirm, rather than subtract from, sentiments that QE taper would be started,” said Vishnu Varathan, an economist at Mizuho Bank Ltd. in Singapore. “They are still watching the very dynamic and evolving situation with regard to Syria.”

The ringgit retreated 0.2 per cent, the most among the 11 most-traded Asian currencies, to 3.2927 per dollar as of 10:23am in Kuala Lumpur, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell eight basis points, or 0.08 percentage point, to 9 per cent.

Foreign ownership of Malaysian securities declined 5.7 per cent to RM216 billion in July, Bank Negara figures show. Overseas investors hold 28 per cent of the nation’s government bonds, compared with 18 per cent for Thailand, according to central bank data.

The yield on the 3.26 per cent sovereign notes due March 2018 advanced two basis points to 3.70 per cent, according to data compiled by Bloomberg.

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