Malaysia's ringgit fell by the most in almost two weeks after minutes of the Federal Reserve's last meeting renewed speculation it will trim monetary stimulus, a policy that's driven inflows to emerging-market assets.

Fed officials said they might reduce their US$85 billion in monthly bond purchases "in coming months" as the economy improves, according to minutes of the October 29-30 gathering released late yesterday in Washington. Moody's Investors Service raised the outlook for Malaysia's credit rating to positive from stable yesterday, citing improved prospects for the government's finances. Ten-year sovereign bonds dropped.

"It's more of a strong dollar story because of heightened tapering expectations," said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. "Otherwise, the ringgit would have stayed stable or even appreciated slightly because of the Moody's upgrade."

The ringgit weakened 0.6 per cent to 3.1990 per dollar as of 10.10am in Kuala Lumpur, the biggest drop since November 11, according to data compiled by Bloomberg. The currency declined 1.4 per cent in November, trimming this quarter's gain to 1.9 per cent, the best performance in Asia.

While US employers added 204,000 workers to payrolls last month, more than the 120,000 estimate, the central bank probably won't taper its debt purchases until March, according to the median of 32 economists' estimates in a Bloomberg News survey conducted November 8. The next meeting is December 17-18.

A pick up in employment could increase the chance of a reduction in bond purchases next month, Fed Bank of St. Louis President James Bullard, a voter on policy this year who has backed record stimulus, said in a Bloomberg Television interview yesterday.

Moody's cited improved prospects for fiscal consolidation in Malaysia, economic reforms and macroeconomic stability for its decision to raise the outlook on the nation's A3 rating, the fourth-lowest investment grade.

One-month implied volatility in the ringgit, a measure of expected moves in the exchange rate used to price options, rose 21 basis points, or 0.21 percentage point, to 8.34 per cent.

Malaysia will sell RM4 billion of 2024 bonds today, according to its debt sale calendar. The yield on the government's existing 3.48 per cent notes due in March 2023 climbed two basis points to 3.98 per cent, the highest level since September 4, data compiled by Bloomberg show.-- Bloomberg