Ringgit near three-week low despite strong GDP data

Investors are also cautious over the upcoming Malaysian general election. – Reuters picInvestors are also cautious over the upcoming Malaysian general election. – Reuters picSINGAPORE, Feb 21 — The ringgit fell to a near three-week low against the dollar today as interbank speculators shrugged off stong economic growth data and added dollar positions on expectations the US Federal Reserve may stop buying bonds sooner than expected.

The ringgit slid 0.2 per cent to 3.1020 per dollar as of 0232 GMT, after hitting 3.1050, its weakest since February 4.

RHB Research reported that real GDP in Malaysia rebounded to record a stronger growth of 6.4 per cent yoy in the 4Q, after moderating to +5.3 per cent in the 3Q.

The headline inflation rate inched up to 1.3 per cent yoy in January, after moderating to 1.2 per cent in December and at the same rate of increase as in September-November.

The current account surplus in the balance of payments rebounded sharply to increase by 139.9 per cent to RM22.8bn in the 4Q, after recording a lower surplus of RM9.5bn in the 3Q and compared with RM9.6bn in the 2Q.

“It is an environment of a firm dollar after last night’s Fed’s minutes,” said a senior Malaysian bank dealer in Kuala Lumpur.

Yesterday, minutes of the Fed’s last policy meeting showed some policymakers thought the Fed might have to slow or stop buying bonds before seeing a pickup in employment.

“In the short term, we are buying dollar, although in medium term, we will buy the ringgit,” said the trader, adding he expected the ringgit to head to 3.1140 and 3.1200.

Investors are also cautious over the upcoming Malaysian general election, which must be called by the end of April. The ringgit has lost 1.4 per cent to the dollar so far this year and local stocks have fallen more than 4 per cent as political uncertainty grows.

Malaysia’s financial markets were caught napping in 2008 when shock gains by the opposition redrew the country’s political map and sparked a 10 per cent one-day plunge in the main index.

The scope for a surprise is very much alive five years later due to a lack of reliable opinion polls and signs that the three-party opposition led by former deputy prime minister Anwar Ibrahim is mounting a well-organised campaign.

Still, some investors expected the ringgit to eventually benefit from the country’s strong economic fundamentals.

Malaysia’s economy grew at its fastest pace in more than two years in the last quarter of 2012, data showed late yesterday.

“We see the election uncertainty as transitory and expect continued portfolio inflows this year in the context of robust economic growth, a growing current account surplus and benign inflation,” Barclays said in a note. — Reuters


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