Traders are pricing a roughly one in five chance that Bank Negara Malaysia will hike interest rates.
The chance of a rate hike in Malaysia, where the ringgit is near its weakest level since 1998, has increased.
The spread between the Philippine two-year bond yield and Bangko Sentral ng Pilipinas key rate widened after BI’s decision, indicating traders are anticipating a greater chance of a rate hike, according to data compiled by Bloomberg.The chance of a rate hike in Malaysia, where the ringgit remains near the weakest level since 1998, has also increased, as per the data.
A tighter monetary policy may be one way to support currencies that have slumped to multi-year lows this week, as it would help bridge their interest-rate gap with the US, where bets on higher-for-longer rates have pushed up yields. However, headwinds from China’s slowdown would remain as exports continue to suffer and limit the amount of dollars in those markets.
Traders are also pricing a roughly one in five chance Bank Negara Malaysia will hike interest rates, which is marginally higher than expectations prior to the BI meeting, due to the political sensitivity of a weak ringgit and falling reserves, said Philip McNicholas, Asia sovereign strategist at Robeco Group in Singapore.
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