By Liau Y-Sing
July 25 (Bloomberg) -- Malaysia’s ringgit gained after European Central Bank council member Ewald Nowotny said there are arguments in favor of giving Europe’s rescue fund a banking license.
The currency reversed earlier losses after Nowotny’s comments, which reduced the concern the region’s debt crisis will worsen. Granting a banking license to Europe’s permanent bailout fund would give it access to ECB lending, easing concern that its 500 billion euro ($606 billion) cash pot won’t be enough if Spain or Italy require aid.
“Nowotny’s comments provided some impetus for the euro to strengthen and on the back of that, we’ve seen some decent gains for Asian currencies,” said Suresh Kumar Ramanathan, head of regional currency strategy at CIMB Investment Bank Bhd. in Kuala Lumpur. “The market has bought the story that they are discussing a proper banking license for the bailout fund.”
The ringgit climbed 0.2 percent to 3.1755 per dollar as of 5:04 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.1921 earlier, the weakest level since July 13. One-month implied volatility, a measure of exchange- rate swings used to price options, rose 25 basis points to 6.75 percent.
Domestic demand will anchor Malaysia’s economic growth, with consumption and investment activity remaining resilient, the central bank said in a statement after its regular policy review on July 5.
Government bonds advanced. The yield on the 3.314 percent notes due October 2017 dropped three basis points, or 0.03 percentage point, to 3.13 percent, according to Bursa Malaysia.
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