Ringgit jumps against US, Singdollar to lead Asian currency rally as Fed rate odds dip further

The Malaysian ringgit led an advance in Asian currencies on Oct 15 as odds of a US interest-rate increase this year diminished further.
The Malaysian ringgit led an advance in Asian currencies on Oct 15 as odds of a US interest-rate increase this year diminished further. PHOTO: REUTERS

KUALA LUMPUR (BLOOMBERG) - The ringgit led an advance in Asian currencies as odds of a US interest-rate increase this year diminished further, giving a reprieve to emerging-market assets.

The Malaysian currency appreciated 1.4 per cent to 4.1250 per US dollar as of 8:54 am in Kuala Lumpur as trading resumed following a holiday on Wednesday, prices from local banks compiled by Bloomberg show.

The ringgit also jumped against the Singapore dollar, trading at 2.9903 per Singdollar at 9:37am from Wednesday's close of 3.0142.

Asian currencies are rallying in October as futures show just a 33 per cent chance of a rate hike by the Federal Reserve, compared with 61 per cent at the start of the month. Exchange rates in the region have come under pressure this year as prospects for US monetary tightening fueled concern that demand for local assets would recede. The ringgit had seen the biggest selloff as a slump in Brent crude cuts earnings for the oil exporter and a political scandal involving the prime minister erodes investor confidence.

"The Fed rate hike is being pushed out into next year in light of some dissenting voices from the Fed board and also the weak data," said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore. "I'm wary about the ringgit's strength. The domestic political headlines could from time to time be a driver for the ringgit."

While the ringgit has rallied 6.4 per cent in October in Asia's best performance after Indonesia's rupiah, it is still down 14 per cent this year.

Fed governor Daniel Tarullo told the CNBC television channel that he doesn't currently favor raising interest rates in 2015, after fellow governor Lael Brainard made the case this week for patience. Data on Wednesday showed US retail sales rose 0.1 per cent in September from a month earlier, below the median estimate of economists in a Bloomberg survey for a 0.2 per cent gain. The August number was revised down to zero.