KUALA LUMPUR (July 5): Bank Negara Malaysia's international reserves slipped 0.3% by June 28 from a fortnight earlier, the central bank said on Friday.
The latest foreign exchange reserves totalled US$113.8 billion (RM535.9 billion), compared with US$114.1 billion as of June 14, Bank Negara Malaysia (BNM) said in a statement.
The position is sufficient to finance 5.4 months of imports of goods and services, and is one time the total short-term external debt, it added.
Meanwhile, the central bank’s net short position in May narrowed slightly to US$26.9 billion from a record high of US$27.85 billion in April, the latest update on its website shows.
May’s short position of US$26.9 billion represents 23.6% of the bank's end-May international reserves. BNM releases data on foreign exchange reserves every two weeks while its foreign currency liquidity data is made available on a monthly basis.
If the short position was taken into account, the central bank's end-May international reserves at end-May would have totalled US$86.69 billion, instead of US$113.59 billion.
BNM’s use of the currency forwards to manage short-term pressures on the ringgit made headlines in mid-June, with forwards hitting a record high in April, coinciding with the ringgit gaining strength.
There has been concern that a huge net short position would make the ringgit sensitive to changes in risk sentiment and more vulnerable to a selloff in the event of a sudden downward shift in global sentiment.
However, BNM has said its forward position reflects activities undertaken to ensure the orderly functioning of domestic financial markets during periods of heightened capital flow volatility and to ensure sufficient onshore liquidity for effective financial intermediation.
“To be clear, Bank Negara has focused its foreign exchange (forex) interventions in the spot market. The forward transactions are tools deployed to manage ringgit liquidity and certainly not for influencing the exchange rate or the reserve level,” the central bank said in a previous reply to The Edge.
The central bank further said its forward transactions essentially either provide or absorb ringgit liquidity through the banking system during heightened capital outflows or inflows.