“Expectations of ringgit strength attracted foreign bond flows, probably on an FX-unhedged basis to position for FX gains, creating a positive feedback loop,” said Winson Phoon, head of fixed income research at Maybank Securities in Singapore. “The stars have aligned for the ringgit and local bonds.”
The Malaysian ringgit’s rally is luring global funds to buy more local bonds, giving a further boost to emerging market’s top-performing currency this quarter.
Foreign investors poured 5.5 billion ringgit ($1.63 billion) into Malaysian bonds in July, the largest monthly inflow in a year, according to data from Bank Negara Malaysia. The recent surge in the currency has pushed total returns on ringgit notes to 5.9% this year, among the highest in emerging markets.
