KUALA LUMPUR (June 28): The ringgit has 'significant potential' to appreciate and be among the top beneficiaries of any US interest rate cuts, Bank Negara Malaysia’s (BNM) Financial Markets Committee said on Friday.
Foreign sentiment remains positive and has improved further on the back of engagement efforts by the government, BNM and industry players, according to the summary of the 15-member committee’s discussion. On balance, the meeting was optimistic about the ringgit’s near-term outlook, it said.
“Headwinds remain, including geopolitical risks, uncertainty over the US rate hike trajectory, as well as the timing and extent of further domestic subsidy rationalisation,” the committee flagged.
However, members are confident “domestic market stability and the concerted efforts of all parties involved would eventually result in a stronger performance of the ringgit”, the committee said.
The ringgit has declined 2.6% against the US dollar so far this year, tracking the depreciation of major Asian currencies amid broad greenback strength, due to expectations for fewer rate cuts by the US Federal Reserve this year.
The committee, set up in in 2016 to broaden industry engagement, also welcomed Nor Hanifah Hashim from Franklin Templeton as a new member. Current members include representatives from BNM, the Securities Commission Malaysia, and financial institutions including insurers and fund managers.
Members also acknowledged BNM’s presence in the foreign exchange market to ensure orderly conditions during the latest meeting, the committee said.
“Critically, the meeting also noted that the historically high correlation between the ringgit and the renminbi (Chinese yuan) had declined significantly,” it said.
The meeting also noted BNM’s previously reported pilot programme to repatriate foreign currency balances and facilitate fast-track approval for future investments abroad, and that “the programme will be expanded in the future”.