KUALA LUMPUR (March 24): The Malaysian ringgit could be more volatile this year as capital flows fluctuate sharply with global policy uncertainties, the central bank cautioned.

Foreign inflows from narrower interest rate differentials will support the ringgit, while prolonged high US interest rates and safe-haven demand for US dollar will weigh on the local currency, Bank Negara Malaysia (BNM) said in its 2024 Economic and Monetary Review released on Monday.

“Given policy uncertainties across major economies, the Malaysian ringgit may be subject to heightened bouts of volatility, as investors react to policy announcements and details on implementation, as well as developments on geopolitical conflicts,” BNM said.

The ringgit has remained relatively steady so far this year against the US dollar after a stellar 2024, thanks to the steadily expanding economy, while the country has largely dodged trade actions by the US against its major trading partners.

Coordinated actions by BNM and the government to encourage repatriation and conversion of foreign earnings by corporations and institutional investors have also propped up the currency last year.

While the ringgit may be cyclically volatile in the short term, “favourable economic prospects, domestic structural reforms, and [the] ability to attract long-term investments, complemented by ongoing initiatives to encourage flows, will provide an enduring longer-term support,” BNM added.

Click here to read more stories on BNM Annual Report 2024.