KUALA LUMPUR (May 17): Action by Bank Negara Malaysia (BNM) and the government to promote consistent inflows into the foreign exchange (forex) market has eased the pressure on the ringgit against the US dollar, the central bank’s governor Datuk Shaik Abdul Rasheed Abdul Ghaffour said.
This was evidenced by the local currency appreciating 1.6% against the greenback between Feb 26 and May 15 this year. Prior to the implementation of the coordinated measures on Feb 26, the ringgit had fallen by 3.9% against the US dollar, he said.
“[While you] mentioned that the ringgit has been hovering between 4.68 and 4.70 against the US dollar, it's important to note that the ringgit has actually strengthened since the implementation of [coordinated measures] on Feb 26, which have brought positive results,” the governor told reporters on Friday.
He reiterated that the government and BNM had taken coordinated actions to encourage consistent flows into the FX market, such as encouraging repatriation and conversion of foreign investment income by government linked companies and government linked investment companies, actively engage corporates and exporters to convert their export proceeds and foreign investment income, and monitor conversion of export proceeds and import payments.
Abdul Rasheed was responding to reporters' questions about the steps BNM had taken to strengthen the local currency against the greenback, following the announcement of first-quarter gross domestic product data on Friday.
In addition, he said the ringgit’s nominal effective exchange rate had increased to 2.5% (from -1.9%). In terms of FX trading volume, the daily average increased to US$17.6 billion (RM82.40 billion) from US$15 billion, and the US dollar-ringgit bid-ask spread narrowed to 39 pips from 50 pips previously.
Since the beginning of 2024, the ringgit had depreciated from 4.60, reaching a 26-year low of 4.80 against the US dollar on Feb 20 — a range last seen during the peak of the Asian financial crisis in 1998. However, the ringgit has since recovered to 4.6800 as of Friday.
In March, BNM said it found rising foreign currency holdings among Malaysian corporates, exporters and importers, resulting in an imbalance that weakened the ringgit in the short run.
On top of the call on state-owned companies, the central bank “strongly urged” Malaysian businesses from all sectors to repatriate their investment income, and convert export proceeds back to ringgit to support efforts to manage short-term pressure on the local currency.