Ringgit rises to 4-month high

Published: 2009/05/04

THE ringgit climbed to a four-month high as signs of a global economic recovery increased demand for emerging-market assets, driving a rally in stocks.The currency extended a two-month advance after the central bank last week said stimulus spending will revive growth in the second half of the year and policy makers left interest rates unchanged.

Asian stocks rose, adding to last month’s gains, after reports on May 1 showed measures of US manufacturing and consumer confidence unexpectedly jumped in April, adding to evidence the world’s biggest economy is on the mend.

“Risk appetite is improving, so you see not only the ringgit but currencies across the board improve,” said Nizam Idris, a currency strategist in Singapore at UBS AG. “There’s a lot of cash wanting to be put to work, so we’re seeing stocks rally as well.”

The ringgit strengthened as much as 1.2 per cent to 3.5175 a dollar, the highest level since January 8, before trading at 3.5315 as of 4:55 pm in Kuala Lumpur, according to data compiled by Bloomberg.

Eight of Asia’s 10 most-traded currencies excluding the yen climbed against the greenback after a report today showed a gauge of Chinese manufacturing expanded for the first time in nine months in April.

A survey by CLSA Asia-Pacific Markets showed the China Purchasing Managers’ Index rose to a seasonally adjusted 50.1 from 44.8 in March. A reading above 50 indicates expansion. The Institute for Supply Management’s US factory index increased to 40.1 from 36.3 in March, while the Reuters/University of Michigan final index of consumer sentiment jumped by the most in more than two years, climbing to 65.1.Bank Negara Malaysia said April 29 that the RM67 billion (US$19 billion) of planned stimulus measures since October may be enough to trigger an economic rebound after a “marked” contraction in the first quarter.

Emerging-market stocks may “break out” into a bull market at the end of the year as falling interest rates and easing inflation make equities more attractive, Templeton Asset Management Ltd’s Mark Mobius said yesterday in an interview in Bali, Indonesia.

“We are at the base building period for the next bull market,” said Mobius, who helps oversee US$20 billion in emerging-market assets at San Mateo, California-based Templeton. “What I see happening is perhaps this continuing till the end of the year, and then a break out.”

Emerging-market equity funds have taken in US$10.5 billion this year, while those funds focused on developed markets have posted collective outflows of US$61.7 billion, according to Cambridge, Massachusetts-based research firm EPFR Global. - Bloomberg