Ringgit slides to six-year low on prospects for US rate rise

[KUALA LUMPUR] Malaysia's ringgit slid to a six-year low versus the dollar after US jobs data hardened speculation the Federal Reserve will increase interest rates by the end of June.

The unemployment rate in the world's largest economy fell in February to the lowest since 2008 as hiring picked up, according to a March 6 report which spurred a jump in US Treasury yields. Futures showed a 72 per cent likelihood that the Fed will tighten by June, compared with 67 per cent a week ago. China, Malaysia's second-biggest export market in 2014, reported trade data on Sunday that showed imports slumped more than economists expected in February.

"US employment conditions continue to improve," said Masashi Murata, a currency strategist at Brown Brothers Harriman & Co in Tokyo. "Expectation that the Fed will start to hike rates in June led to higher US yields, which depresses the ringgit." The ringgit depreciated 0.9 per cent, the most in two weeks, to 3.6840 a dollar as of 10 am in Kuala Lumpur, according to data compiled by Bloomberg. It sank as low as 3.6908.

China's imports dropped 20.5 per cent last month from a year earlier, double the 10 percent decline forecast in a Bloomberg survey. Malaysia's exports fell 0.6 per cent in January, less than December's 2.7 per cent gain and the 2.5 per cent increase forecast in a Bloomberg survey, official data showed March 6.

Government bonds retreated. The yield on 10-year notes rose three basis points, or 0.03 percentage point, to 3.95 per cent, the highest since Jan 22, according to data compiled by Bloomberg. The rate on similar-maturity US Treasuries jumped 13 basis points on Friday to 2.24 per cent.

BLOOMBERG