(Sept 15): Malaysia’s ringgit fell by the most in a year and led losses in Asia on concern a strengthening U.S. economy will prompt the Federal Reserve to bring forward its timeline for raising borrowing costs.

Fed officials start a two-day policy meeting tomorrow after a Sept. 12 report showed U.S. retail sales increased at the fastest pace in four months in August. The central bank said July 30 it may keep interest rates low for a “considerable time” after ending its bond-buying program. Overseas investors held 32 percent of Malaysian government debt in July, compared with 17 percent in Thailand, official data show.

“Markets are factoring in the possibility of the Federal Open Market Committee changing their forward guidance language at this week’s meeting,” said Khoon Goh, a senior foreign- exchange strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “The ringgit has depreciated, following the broader weakness seen in regional currencies.”

The ringgit retreated 1 percent to 3.2290 per dollar in Kuala Lumpur, according to data compiled by Bloomberg. It earlier reached 3.2327, the weakest since June 18.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 109 basis points, or 1.09 percentage points, to 8.08 percent. That’s the highest since Jan. 31. Local financial markets are shut for a holiday tomorrow.

Borrowers from emerging markets may need to refinance about $90 billion next year and as much as $130 billion by 2017-2018, which could be challenging if the dollar strengthens and domestic economies slow, according to the Bank for International Settlements’ Quarterly Review issued yesterday.

Malaysia Rates

The ringgit’s drop could have been spurred by uncertainty about whether Bank Negara Malaysia will raise interest rates at its Sept. 18 review, according to Barclays Plc.

“There could also be hesitancy ahead of the policy decision that we may see some positions being taken off,” said Mitul Kotecha, the Singapore-based head of Asia Pacific foreign- exchange strategy at Barclays Plc.

Malaysia’s central bank increased the benchmark rate by 25 basis points to 3.25 percent on July 10, its first such move in more than three years.

The ringgit also weakened as a slowdown in Chinese factory output stoked concern about growth in Malaysia’s second-biggest overseas market, according to Rabobank International.

China’s industrial production rose 6.9 percent in August, figures showed Sept. 13. That was the smallest gain since 2008.

Exports Slowing

The Malaysian currency’s drop “is probably on the back of the weaker Chinese data,” said Michael Every, the head of Asia Pacific financial-markets research at Rabobank in Hong Kong. “That’s on top of the general run-up to the nervousness that we’ve got flying around in the market ahead of the Fed.”

Malaysian exports are already showing signs of slowing. Shipments increased 0.6 percent in July from a year earlier, the least in 13 months, according to a Sept. 5 report. That was below the 5.3 percent median estimate in a Bloomberg survey.

The yield on Malaysia’s 4.181 percent sovereign bonds due July 2024 was steady at 4 percent, data compiled by Bloomberg show. The rate has climbed seven basis points this month.