Bank Negara Financial Markets Committee in their recent meeting to discuss on the ringgits movements noted that regional currencies continue to be driven by global factors, particularly uncertainties surrounding the timing and extent of interest rate adjustments by major central banks.
This they said was further evidenced by the stronger-than-expected US labour market data last Friday, indicating a more resilient US economy, and thus increases the risk of the US Fed maintaining interest rates “higher for longer”.
Nevertheless, the members noted market expectations remain for the Fed to lower interest rates in 2H of 2024.
FMC members noted that this morning, the ringgit traded in an orderly manner. It opened at 4.7475, the same level as Friday’s close and moved in tandem with other regional currencies.
The members pointed out that since 26 February, the ringgit was the only regional currency that strengthened against the US dollar (USD), gaining 0.6%.
Across the same period, the average daily FX volume was USD17.6 billion compared to USD15.5 billion in 2023. FMC members noted the higher FX conversion activities in the onshore FX market, driven by the significant flows arising from the coordinated efforts as well as opportunistic selling of USD by certain exporters.
The meeting views that the ongoing coordinated efforts can be sustained given that the focus is on investment income and export revenue which are recurring in nature. In addition, a more sustained ringgit strengthening could spur greater interest for FX conversion by corporates with excess foreign currency holdings, further supporting sentiment on the ringgit. The meeting was particularly encouraged by BNM’s enhanced efforts to further promote FX conversion activities by Malaysian corporates and businesses.
FMC Chairman and Bank Negara Malaysia Deputy Governor, Adnan Zaylani stated, “The current level of ringgit is deemed undervalued, particularly as Malaysia’s economic fundamentals continue to be strong and the economic prospect is positive.” In response to lingering concerns among market participants, he also reaffirmed, “BNM is not considering capital controls or restrictions like those introduced during the Asian Financial Crisis (AFC) taking into account the potential costs and impact to the economy.”
