* Ringgit outperforms some SE Asia currencies
* Immediate chart resistance seen at 3.2600/dlr for now
SINGAPORE, Sept 3 (Reuters) - The Malaysian ringgit hit athree-week high on Tuesday, outperforming some Southeast Asiancurrencies, as offshore funds bought it after the government cutfuel subsidies to reduce the country's fiscal deficit.
The ringgit advanced 0.29 percent to 3.2645 as of 0307 GMT,after hitting 3.2590, its strongest since Aug. 13.
That compared with a 0.23 percent gain for the Thai baht and 0.27 percent appreciation of the Philippine peso.
Malaysian government bond yields slid.
Late Monday, Malaysia Prime Minister Najib Razak looked tosidestep political opponents and temper market jitters bycutting fuel subsidies to beef up the country's fiscal position,which had spurred capital outflows.
The cuts in petrol subsidies, effective from Tuesday, willsave the government an estimated 1.1 billion ringgit ($336million) this year and another 3.3 billion ringgit in 2014, hesaid.
Saktiandi Supaat, head of FX research for Maybank inSingapore, said the subsidy cut "will help support the ringgitin so much as it will reduce the fiscal deficit."
"The intensity of support will depend on the budgetannouncement in October. Still, it is a good start as it willhelp allay concerns until the budget," he said.
Supaat said the ringgit may outperform other Southeast Asiancurrencies after the 2014 budget plan and especially if thegovernment takes additional steps such as smaller publicspending.
In 2012, Malaysia's budget deficit was 4.5 percent of grossdomestic product, the second highest in emerging markets afterIndia. Ratings agency Fitch cited the high budget deficit as onefactor when it lowered the outlook on Malaysia's A-/A creditratings to negative from stable in late August.
The commodity-dependent country's fiscal gap slowing exportsand high foreign ownership of government bonds has highlightedits vulnerability to market sell-offs amid the recent currencyrout.
The ringgit has suffered monthly losses since May whenNajib's coalition extended its 56-year rule but had itsworst-ever election performance.
During the four months, it lost 7.4 percent against thedollar, according to Thomson Reuters data. One factor puttingpressure on the ringgit in those months was an absence ofreforms to reduce the fiscal deficit.
The local unit is seen facing an immediate chart resistanceat 3.2600, its session lows of early August, traders andanalysts said.
The next level would be 3.2461, the 23.6 percent Fibonacciretracement of its depreciation between May and August.
Still, the ringgit is not free from expectations that theFederal Reserve may start reducing bond-buying programme as soonas this month, traders and analysts said.
"I don't think the ringgit will break 3.25 even, unless Fedtapering is postponed to December," said an Asian bank trader inSingapore.
(Reporting by Jongwoo Cheon and Reuters FX Analyst Rick Lloyd;Editing by Richard Borsuk)
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