Malaysia ringgit hits 3-yr low against US$ on outflows, then rebounds on debt sale

A money changer counts Malaysian ringgit notes in Kuala Lumpur on Jan 29, 2013. The Malaysian ringgit hit a fresh three-year low on Tuesday, July 30, 2013, due to redemption of maturing bonds, but it turned higher on strong demand for new government
A money changer counts Malaysian ringgit notes in Kuala Lumpur on Jan 29, 2013. The Malaysian ringgit hit a fresh three-year low on Tuesday, July 30, 2013, due to redemption of maturing bonds, but it turned higher on strong demand for new government bonds, which should help the currency strengthen further. -- FILE PHOTO: REUTERS

REUTERS - The Malaysian ringgit hit a fresh three-year low early Tuesday due to redemption of maturing bonds, but it turned higher on strong demand for new government bonds, which should help the currency strengthen further.

Early in the day, the ringgit lost 0.3 per cent to 3.2365 per United States dollar, its weakest since July 1, 2010, pressured by bond outflows. The local currency touched 2.5520 to the Singapore dollar, the weakest since July 1998.

Pushing down the ringgit were concerns on outflows, as 9.2 billion ringgit (S$3.6 billion) worth of government bonds are due on Wednesday, according to central bank data.

However, the Malaysian currency turned slightly higher, as agent banks of the central bank were spotted selling dollars and some investors covered short positions, traders said.

The country sold 4.5 billion ringgit in 7-year government bonds at an average yield of 3.889 per cent with the bid-to-cover ratio at 1.91 times.

One trader said he believes that "feared outflows from maturity of 9.24 billion ringgit of Malaysian Government Securities should be mostly done by now."

"We expect to see some relief rally in MGS with fears of a poor auction proven unfounded," the trader added.

The ringgit may well rebound once the maturity repatriation is completed, traders and analysts said.

A senior Malaysian bank trader in Kuala Lumpur also expected the ringgit to strengthen above 3.2200, saying that some overseas speculators built up bearish positions in the currency to cover bond outflows.

The ringgit has lost 2 per cent against the US dollar this month, becoming the second-worst performing emerging Asian currency after the Indonesian rupiah, according to Thomson Reuters data.

Still, it is premature to expect the Malaysian currency and bonds to stabilise at a time of caution over the Federal Reserve's planned reduction in monetary stimulus and weaker domestic economic fundamentals, some analysts said.