KUALA LUMPUR — January 13, 2017: Several measures introduced by Bank Negara Malaysia (BNM) last December have helped stabilise the ringgit and the central bank is ready to step in with more if needed.
However the full impact of the measures implemented on December 5 is expected to be seen only in mid-2017 and if necessary, BNM will introduce new measures to further strengthen it.
“These new measures are however not capital control or fixing of the ringgit but to stabilise it and ensure liquidity in the market,” BNM governor Datuk Muhammad Ibrahim said after the launch of the Karnival Kewangan Malaysia 2017 here today.
He stated that Malaysia’s financial market is open and those who want to come in can also always go out.
“We will always welcome long-term investors into our bond market and we must ensure that they are protected by stabilising our currency so that they can make profits,” he said.
Muhammad said results from initial measures implemented last year show that the local currency has stabilised very much.
Among the measures taken were to allow exporters to retain only up to 25 per cent of export proceeds in foreign currency and the rest in ringgit.
Other measures include allowing residents, including resident fund managers, to freely and actively hedge their US dollar and Chinese renminbi with an exposure of up to a limit of RM6 million per client per bank.
Residents with domestic ringgit borrowing are free to invest in foreign currency assets, both onshore and abroad, up to the prudential limit of RM50 million for corporates and RM1 million for individuals.
“We must not be fixated on any particular levels (of the ringgit). Once we have realigned the demand and supply for it be dictated by actual demand for the currency, that is where the ringgit will stabilise.
“The key point is that ringgit must stabilise because it will let businesses to make the right decision,” said Muhammad.
In his speech, Muhammad said BNM and the financial markets committee had taken intervention measures to mitigate speculative activities in the offshore markets.
He remarked that many observers and economic analysts had placed the value of the ringgit at an inaccurate and counter-productive level.
He also said that the demand for the ringgit in the domestic currency market is getting better and its volatility has eased.
“The depreciation of the ringgit is not a unique or isolated situation but is a global phenomenon.
“The significant strengthening of the US dollar has caused the entire global and regional currencies to deteriorate.”
This is due to several factors, including uncertain monetary policies in the US plus current developments in the economy and world and regional politics.
The global situation has also disrupted the international financial market sentiment and caused rapid outflows of funds from domestic markets, resulting in the deterioration of the value of currencies in most countries.
“The ringgit is also influenced by our economic structure and financial market which is among the most open in developing countries.
“Our market is exposed to uncertainty in the global financial markets resulting investment portfolio reversal,” said Muhammad. — Bernama