KUALA LUMPUR (Aug 9): With the recent strengthening of the ringgit, Bank Negara Malaysia (BNM) said there has been an increase in the conversion of export proceeds into the local currency by exporters.

Meanwhile, importers continue to manage purchases and hedging of the US dollar for their business requirements, the central bank said in a statement on Wednesday (Aug 9) following the conclusion of its Financial Markets Committee (FMC) meeting discussion on Aug 7 in relation to the forex market development.

BNM noted that the market sentiment surrounding the ringgit has generally improved on expectation that the US Federal Reserve (Fed) will be approaching the end of its rate hike cycle on signs of moderating inflation and China’s continued measures to spur economic recovery.

Since the last FMC meeting in June, the ringgit has strengthened by 2.5% against the US dollar and is trading firmer against other regional currencies, according to BNM. Trading at 4.5730 as at 5pm on Wednesday, the local currency is still down about 4% against the greenback year to date.

The central bank highlighted that the rebound in market sentiment was observable from robust foreign interest in the domestic financial markets.

“Non-residents continued their purchases of Malaysian government bonds with a year-to-date increase in holdings of RM22.5 billion as at end-June.

“In the equity market, non-resident investors recorded inflows of RM1.4 billion in July, reversing 10 consecutive months of outflows and contributing to the KLCI’s strong performance of a 6% gain,” it explained.

Looking ahead, BNM said market players expect that further clarity on the path of interest rates by major central banks will provide support to the ringgit and emerging market currencies in general.

The central bank said the FMC meeting has reaffirmed the importance of the ringgit to be determined by market forces to allow for adjustments to occur in line with global developments as well as domestic fundamentals

“The meeting took note of market participants’ positive feedback on the FMC statement in June, as well as the reaffirmation from BNM to continue to curb excessive volatility or depreciation by carrying out intervention in the foreign exchange market.”

On economic growth in 2023, BNM said it continues to be supported by domestic investments and a gradual recovery in tourism. 

“Members positively viewed the recent announcements of the Madani Economy Framework and National Energy Transition Roadmap (NETR), which underscore the government’s commitment to structural reforms,” the central bank noted.

It added that these initiatives could potentially improve economic competitiveness, facilitate the transition to a more sustainable economy, as well as providing a measure of support for the long-term outlook of the ringgit.