Malaysia’s ringgit traded 0.2 per cent shy of its strongest level since October before today’s central bank meeting, which is forecast to lead to the nation’s first interest-rate increase in three years.

Fifteen of 21 economists surveyed by Bloomberg predict Bank Negara Malaysia will increase the benchmark policy rate by 25 basis points to 3.25 per cent, while the rest see no change. “The degree of monetary accommodation may need to be adjusted” to address financial and economic imbalances, according to a May 8 central bank statement issued after the last review.

“There is a broad overwhelming consensus now in the market that a rate hike is coming,” said Mirza Baig, BNP Paribas SA’s Singapore-based head of Asia currency and rates strategy. “The official communication has guided the market in this respect.”

The ringgit was little changed at 3.1712 per dollar as of 12:16 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It climbed to 3.1653 yesterday, the strongest level since October 31, and has gained 1.3 percent in July, trailing only Indonesia’s rupiah among 24 emerging-market currencies tracked by Bloomberg.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped two basis points, or 0.02 percentage point, to 5.04 per cent.

One-year interest-rate swaps were at 3.68 percent, the highest level since September 2008.

BNP expects Bank Negara to keep interest rates unchanged at today’s meeting, said Baig. The decision is due after the markets close at 6pm local time.

“I’m a bit surprised by the strength of the ringgit,” he said. “Our sense is that a rate hike is not necessarily going to slow down household leverage growth and macro-prudential measures would probably be the more appropriate tool.”

Malaysia’s factory output increased six per cent in May from a year earlier, exceeding the median estimate of economists for a 4.2 per cent gain and a revised 4.9 per cent advance the previous month, a government report showed today.

The yield on Malaysia’s 3.394 per cent sovereign bonds due March 2017 dropped three basis points to 3.52 per cent, data compiled by Bloomberg show. The five-year yield held at 3.70 per cent.-- Bloomberg