Ringgit appreciates for 3rd day

Published: 2009/05/20

RINGGITMALAYSIA'S ringgit yesterday rose for a third day on speculation the central bank will refrain from cutting the benchmark interest rate next week, maintaining the currency’s yield advantage over the US dollar.

The currency climbed the most in two weeks as global equities rallied, fueling optimism investors will increase holdings of emerging-market assets. Forwards contracts show traders have pared bets on how far the ringgit will depreciate in a month after Bank Negara Malaysia indicated Southeast Asia’s third-largest economy will recover in the second half.

“The market isn’t pricing in a rate cut this month, so it’s a positive for the ringgit,” said D. Sivadass, a forwards trader at EON Bank Bhd in Kuala Lumpur. “Equities are leading currency gains in the region.”

The ringgit gained 0.4 per cent to 3.5297 per dollar as of 4.45 pm in Kuala Lumpur, according to data compiled by Bloomberg. The currency reached 3.5750 yesterday, the weakest level this month. The Kuala Lumpur Composite Index of local shares rose 1.4 per cent, its biggest gain in almost two weeks.

Non-deliverable forwards signal traders are betting the ringgit will weaken to 3.5328 in a month, compared with expectations for a rate of 3.5796 on April 29, when central bank Governor Tan Sri Zeti Akhtar Aziz said the country’s US$19 billion stimulus spending will revive economic growth this year.

Forwards are agreements in which assets are bought and sold at current prices for delivery at a future specified time and date.INTERBANK RATESSHORT-term rates ended steady yesterday on continued intervention by Bank Negara Malaysia to absorb surplus funds, dealers said.

The overnight rate was quoted at 1.92 per cent while the one-week, two-week and three-week rates were at 1.94 per cent, 1.96 per cent and 1.98 per cent respectively.The liquidity surplus in the conventional system was reduced to RM14.5 billion from the RM18.6 billion estimated earlier.

For Islamic funds, the liquidity surplus was reduced to RM4.7 billion from the earlier estimate of RM6.3 billion.Bank Negara conducted eight tenders, comprising four conventional, two Al-Wadiah, one repo and one commodity murabahah programme, in the morning.

The central bank also issued a late conventional tender for RM14.5 billion of one-day money and an Al-Wadiah tender for RM4.7 billion of one-day money. KLIBORTHE three-month Kuala Lumpur Interbank Offered Rate (KLIBOR) futures contracts on Bursa Malaysia Derivatives closed lower yesterday in quiet trading, dealers said.

March 2011 eased six ticks to 96.85, June 2011 slipped 15 ticks to 96.57 and June 2013 fell five ticks to 95.03. Volume was lower at 80 lots from 190 lots yesterday while open interests rose to 41,221 contracts from 41,101 contracts on Monday.

On the cash market, the underlying three-month KLIBOR was unchanged at 2.12 per cent.The five-year Malaysian Government Securities futures contracts recorded trading for one contract today.June 2009 increased 20 ticks to 109.95 with 100 lots changing hands. - Agencies