Ringgit climbs to 1997 high

The ringgit climbed to the strongest level in 13 years after US manufacturing beat economists’ estimates in August, easing concern about a slowdown in one of Malaysia’s largest export markets

The currency gained for a second day before the central bank meets on interest rates, with policy makers likely to keep borrowing costs on hold to support growth when they announce the decision at 6 pm, according to a Bloomberg survey. The MSCI Asia-Pacific Index of stocks advanced to a two-week high following the US report.

“Markets are recovering rapidly on good external data and it’s possible to see more currency appreciation,” said Akira Banno, a treasury adviser at Bank of Tokyo-Mitsubishi UFJ Bhd in Kuala Lumpur. “There is room for another rate increase in Malaysia in future if this recovery trend is sustained.”

The ringgit gained 0.1 per cent to 3.1250 per dollar as of 9:15 am in Kuala Lumpur, taking its rally so far this year to 9.5 per cent, according to data compiled by Bloomberg. It earlier reached 3.1208, the strongest level since October 1997.

The Institute for Supply Management’s factory index of US manufacturing rose to 56.3 from 55.5 in July, more than the 52.8 median estimate in the Bloomberg survey. Reports yesterday also showed China’s output expanded by more than economists predicted in August and US consumer confidence beat estimates.

The US took 10 per cent of Malaysia’s exports in the first half of this year, according to government data. China, including Hong Kong, bought 18 per cent of shipments and Singapore took 13 per cent.

Bank Negara Malaysia will keep its overnight rate at 2.75 per cent, according to 15 of 17 economists surveyed. Two predicted an increase to 3 per cent.

A trade ministry report due at the same time will probably show Malaysia’s exports rose 11.5 per cent in July from a year earlier, easing from a 17.2 per cent gain in June, according to the median estimate in a separate Bloomberg survey. -- Bloomberg