Ringgit gains most since 2013 as US data tempers Fed rate bets

[KUALA LUMPUR] Malaysia's ringgit rose the most in more than a year as an unexpected drop in US retail sales prompted investors to pare bets for a Federal Reserve interest-rate hike.

Sales declined 0.9 per cent in December, the biggest decrease in almost a year, the US Commerce Department report on Wednesday. Futures indicate a 66 per cent chance the Fed will tighten policy by June versus 73 per cent a week ago. The ringgit has fallen 7.9 per cent in the past three months as a slump in crude prices raised concern about lower revenue for net oil exporter Malaysia.

"Last night's retail sales data was pretty poor and combine that with the softer wages backdrop, there's no sense in which the Fed has to be in a hurry to be raising rates," said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp in Singapore.

"I wouldn't think that the ringgit can decouple indefinitely from oil."

Malaysia's currency appreciated one per cent, the biggest advance since October 2013, to 3.5587 a dollar in Kuala Lumpur, according to data compiled by Bloomberg. It fell to 3.6045 on Wednesday, the lowest level in almost six years.

Malayan Banking Bhd cut its first-quarter ringgit forecast to 3.70 from 3.50, and its year-end estimate to 3.50 from 3.45, due to the decline in oil and increased market volatility, analysts led by Saktiandi Supaat wrote in a report on Wednesday.

The ringgit's one-month implied volatility used to price options is the highest after Indonesia's rupiah in Southeast Asia at 9.6 per cent.

The yield on Malaysia's 10-year sovereign bonds fell one basis point, or 0.01 percentage point, to 3.97 per cent, data compiled by Bloomberg show. The rate has dropped 30 basis points in six days.

BLOOMBERG