Korean won rises with Malaysian ringgit as Fed seen holding fire

[KUALA LUMPUR] South Korea's won jumped the most in a month and the Malaysian ringgit climbed as disappointing US services data reined in bets the Federal Reserve will tighten policy in September.

The odds for a Fed interest-rate hike this month fell to 24 per cent, from 36 per cent a week earlier, after a report Tuesday showed the Institute for Supply Management's services gauge dropped to a six-year low in August. The Bloomberg Dollar Spot Index had its worst day in almost six weeks and US Treasury yields fell after the data.

"Weak US ISM non-manufacturing with soft details is debilitating the odds of a September hike," said Vishnu Varathan, a senior economist in Singapore at Mizuho Bank Ltd.

"The attendant pull-down in Treasury yields is accentuating the allure of Asian currencies."

The won strengthened as much as 1.2 per cent to 1,092.35 per US dollar, its biggest intraday gain since Aug 10, and traded at 1,094.68 as of 10:11am in Seoul, according to prices from local banks compiled by Bloomberg. The ringgit appreciated 0.6 per cent to 4.0595 per US dollar, on course for its biggest one-day gain in a month.

Bank Negara Malaysia will keep the overnight policy rate at 3 per cent at a review on Wednesday, according to 16 of 19 economists in a Bloomberg survey before the decision scheduled for 3pm local time. The rest expect a 25-basis point reduction.

A government report due at noon is forecast to show the nation's exports rose 1.9 per cent in July from a year earlier, after increasing 3.4 per cent the previous month, according to a separate survey.

South Korea's 10-year sovereign notes rose for a third day, pushing the yield down four basis points to 1.47 per cent, according to prices from local banks compiled by Bloomberg.

BLOOMBERG