Ringgit at four-month high

The Malaysian ringgit led gains in emerging Asia, racing to its highest in more than four months on Monday as investors welcomed government steps to tackle a worrying fiscal deficit. The ringgit rose as much as 1.1 percent to 3.1220 per dollar, its strongest since June 17, as traders said the steps attracted capital inflows.
The Taiwan dollar also advanced on stock inflows. Regional currencies barely budged as investors awaited the US Federal Reserve's policy meeting on Tuesday and Wednesday. The central bank is expected to desist from trimming its $85 billion-a-month bond-buying stimulus, with most analysts betting on the cut beginning in March next year. Still, investors were reluctant to chase emerging Asian currencies as they kept a wary eye over Chinese short-term rates, which surged last week to their highest level since a June credit crunch.
"There would not be a tapering at this week's Fed meeting, so I don't expect big volatilities," said Yuna Park, a currency and bond analyst at Dongbu Securities in Seoul. "But investors are wary of China rates and US economic data and are likely to take some profits from Asian FX rather than add more bullish positions," Park said.
Last week, most emerging Asian currencies rose on strengthened expectations that the Fed would postpone a reduction in its stimulus programme. Some traders preferred cutting long positions in emerging Asian currencies. "Everybody knows that the Fed will keep policy until March. So, will you play the obvious or go contrarian?" said a senior Malaysian bank trader in Kuala Lumpur.
The ringgit gained after Malaysia on Friday announced a higher-than-expected goods and services tax of 6 percent for 2015 and abolished subsidies on sugar to rein in its fiscal deficit. The government also hiked property taxes to curb surging home prices. The ringgit may strengthen to 3.1024, the 61.8 percent Fibonacci retracement of the currency's depreciation between May and August, as it cleared a 200-day moving average resistance, traders and analysts said.
Still, some local traders took profits on the view that the ringgit is unlikely to head much higher without broad strength in emerging Asian currencies. The Taiwan dollar gained in subdued trading as local shares rose on inflows from foreign financial institutions.
Domestic importers bought the US dollar for payments below 29.400 to the Taiwan dollar, limiting the local currency's upside. Some foreign financial institutions also sold the Taiwan dollar, while investors were largely reluctant to take any big positions ahead of the Fed policy outcome. The rupiah fell as month-end dollar demand from local corporates prompted investors to book profits from last week's best performing emerging Asian currency. The forward onshore market, or Jakarta Interbank Spot Dollar Rate (JISDOR), was fixed at 11,018 per dollar, compared with Friday's 11,142.