Ringgit rebounds as China's yuan intervention helps calm markets

[KUALA LUMPUR] The ringgit rose the most in two months as speculation China intervened to stem the yuan's plunge helped calm markets following a six-day slide in Malaysia's currency.

Bank Negara Malaysia Governor Zeti Akhtar Aziz said Thursday she has no plans to impose capital controls or a currency peg after the ringgit depreciated 20 per cent in the past year in Asia's worst performance. Second-quarter growth and current-account figures beat estimates. China's surprise devaluation Tuesday spurred the yuan's steepest descent in two decades and triggered a sell off in regional currencies.

"Overall, we've seen the dollar strength being pared back and that benefited the ringgit," said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. "There's some sense of relief that perhaps the situation will not be out of control." The ringgit rebounded 1 per cent to 3.9983 per dollar as of 12:18 pm in Kuala Lumpur, data from local banks compiled by Bloomberg show. It dropped 2 per cent on Wednesday in the biggest loss since 1998 and reached a 17-year low of 4.0415.

A technical indicator was signaling Malaysia's currency was poised to rally after losing almost 6 per cent in the past six days. The dollar's 14-day relative-strength index climbed to 92 on Wednesday, when it was above 70 for an eighth day, the level that suggests a reversal.

Malaysia's gross domestic product rose 4.9 per cent last quarter from a year earlier, more than the 4.5 per cent median estimate in a Bloomberg survey, data showed on Thursday. That's still the slowest since the third quarter of 2013. The current- account surplus, the broadest measure of trade, shrank to 7.6 billion ringgit (S$2.65 billion) from 10 billion ringgit, but beating the forecast 6.1 billion ringgit.

Ms Zeti also told reporters in Kuala Lumpur on Thursday that the impact of a weaker ringgit is manageable and the central bank will seek to rebuild foreign-exchange reserves after they dropped below US$100 billion for the first time since 2010. She plans to stay as central bank chief until her term ends in April, Ms Zeti said.

The ringgit has slumped as a political scandal involving Prime Minister Najib Razak helped worsen the currency's oil- related losses, just as the US prepares to raise interest rates. It weakened beyond 4 per dollar for the first time since 1998 on Wednesday.

Ten-year government bonds rose. The yield declined six basis points to 4.18 per cent and the five-year yield fell seven basis points to 3.92 per cent, prices from Bursa Malaysia show.

BLOOMBERG