Ringgit rises most in a month on bet Fed to hold rates past June

[KUALA LUMPUR] Malaysia's ringgit rose the most in a month on growing speculation the Federal Reserve will delay raising interest rates until the second half, supporting demand for the nation's stocks and bonds.

The ringgit gained 0.7 per cent, the biggest advance since Feb 25, to 3.7060 a dollar as of 9:46 am in Kuala Lumpur, data compiled by Bloomberg show. The Bloomberg Dollar Spot Index was little changed after posting its steepest loss last week since 2011.

Atlanta Fed President Dennis Lockhart and Chicago Fed chief Charles Evans acknowledged that a stronger dollar was a headwind to economic growth, after the central bank indicated it will go slowly with policy tightening once it starts. That may help ease pressure on the ringgit, Asia's worst-performing currency in the past six months, after Fitch Ratings warned last week that there's more than a 50 per cent chance of a credit downgrade.

"The markets have become more confident of the Fed delaying rate hikes," said Masashi Murata, a currency strategist at Brown Brothers Harriman & Co in Tokyo. "They have priced in that the Fed would likely start to hike rates in September, not June." The FTSE Bursa Malaysia KLCI Index of shares rose 0.3 per cent Monday, adding to last week's 1.2 per cent increase. Five-year government bonds were steady after the yield fell three basis points to 3.64 per cent in the five days to March 20.

Futures show a 62 per cent likelihood that the US central bank will raise interest rates by mid-year, compared with 69 per cent a week ago.

BLOOMBERG