Ringgit falls as stocks drop

MALAYSIA'S ringgit weakened on speculation declines in stocks and oil prices will temper demand for riskier emerging-market assets.The currency fell from a two-week high as the Kuala Lumpur Composite Index of equities snapped a three-day advance.Oil, the nation’s second-largest commodity export, slid from a 10- month high.

Bank Negara Malaysia will today keep its overnight rate at a record-low 2 per cent, unchanged since February, according to all 18 economists in a Bloomberg News survey. The decision is due at 6 pm in Kuala Lumpur.“The market is being too optimistic about the recovery scenario, so this will cause some temporary adjustments in stocks and currencies,” said Hideki Hayashi, global economist at Mizuho Securities Co Ltd. in Tokyo.

“Recovery for export- dependent economies will take time until the next spring.”The ringgit fell 0.2 per cent to 3.5170 per dollar as of 9.13 am in Kuala Lumpur, according to data compiled by Bloomberg. It reached 3.5008 yesterday, the strongest level since August 10.Bank Negara will keep borrowing costs on hold for a fourth straight meeting today because demand for electronics goods from developed nations isn’t recovering fast enough to support economic growth, Hayashi said.

“BNM will likely be more conservative on its monetary policy as an insurance policy,” he said. “The present situation is mainly supported by fiscal measures.”Malaysia’s gross domestic product shrank 5.1 per cent in the second quarter from a year earlier, versus a 6.2 per cent contraction in the three months to March, according to the median forecast in a separate Bloomberg survey. The central bank will report the data tomorrow. - Bloomberg