The ringgit rose the most in three weeks as a report that China is stepping up economic stimulus tempered concern a slowdown in Malaysia’s second-biggest export market will deepen.
China is providing 500 billion yuan (US$81.4 billion) of liquidity to the country’s five biggest banks to support growth, Sina.com reported yesterday. The pace of Chinese industrial expansion fell to a five-year low in August, September 13 data showed. Malaysian consumer prices increased 3.3 per cent in August from a year earlier, near the highest level in almost three years, official figures showed today.
“It’s a bit of a relief rally,” said Sim Moh Siong, a strategist at Bank of Singapore Ltd. “Overnight there were reports that the Chinese central bank is going to provide some stimulus. That has helped ease fears of a China slowdown.”
The ringgit strengthened 0.4 per cent from September 15 to 3.2175 per dollar in Kuala Lumpur, after Malaysian markets were shut yesterday for a holiday, according to prices from local banks compiled by Bloomberg. That was the biggest gain since Aug. 27. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 14 basis points, or 0.14 percentage point, to 8.05 per cent.
The People’s Bank of China started providing the five lenders with 100 billion yuan each yesterday through standing lending-facilities with tenor of three months, Sina.com website said, citing analyst Qiu Guanhua at Guotai Junan Securities Co. The PBOC will complete the process today, it said.
The advance in Malaysian consumer prices exceeded the median estimate of economists for an increase of 3.2 per cent and is near the 3.5 per cent level reached in February and March that was the highest since June 2011.
Bank Negara Malaysia will keep its benchmark rate at 3.25 per cent at a review tomorrow after raising it by 25 basis points in July, according to 11 of 20 economists surveyed by Bloomberg. Nine forecast an increase to 3.5 per cent.
ING Groep NV predicts the central bank will increase the policy rate by 25 basis points either tomorrow or at its November 6 meeting as it seeks to “normalize monetary conditions,” Tim Condon, Singapore-based head of Asian research, wrote in a research note today.
The yield on Malaysia’s 3.654 per cent sovereign bonds due October 2019 dropped one basis point to 3.74 per cent, according to data compiled by Bloomberg.-- Bloomberg