Ringgit drops to two-month low as minutes boost US rate bets

[KUALA LUMPUR] Malaysia's ringgit slid to the weakest level in two months after minutes of the Federal Reserve's April meeting boosted speculation US policy makers will raise interest rates as soon as next month.

A gauge of the dollar jumped the most since November on Wednesday and US Treasuries fell as the text of the Fed Open Market Committee's April 26-27 gathering indicated officials see a rate increase next month as likely if the economy keeps improving.

Malaysia's central bank will hold rates for an 11th meeting Thursday, according to a Bloomberg survey before the decision is announced at 6 pm in Kuala Lumpur.

"The major driver that makes the ringgit low is the strengthened expectation of the Fed hiking rates in June," said Masashi Murata, a vice president at Brown Brothers Harriman & Co in Tokyo.

"US Treasury yields rose after the FOMC minutes too, which depressed the ringgit."

The ringgit slid 0.6 per cent to 4.0725 per dollar as of 9:34 am in Kuala Lumpur after depreciating to 4.0763, the weakest since March 21, according to prices from local banks compiled by Bloomberg.

The decline pared its advance this year to 5.4 per cent, still the biggest gain among Asian currencies after the yen.

All except one of 21 economists surveyed by Bloomberg predict Bank Negara Malaysia will keep its overnight policy rate at 3.25 per cent on Thursday.

Governor Muhammad Ibrahim, who will chair the review for the first time since taking office on May 1, said last week monetary policy remains accommodative and supportive of economic activity.

BLOOMBERG