KUALA LUMPUR • Bank Negara Malaysia said it was taking action against an unnamed financial institution for failing to promptly notify the central bank of its dealers' misconduct involving the fixing of the dollar-ringgit exchange rate.
The action comes amid efforts by the central bank to curb offshore trade of the ringgit and stem the fall of the currency, which is one of Asia's worst performing currencies this year.
In a statement yesterday, the central bank said the financial institution facing action failed to notify it of a "significant audit finding".
"The finding indicates that there were communications with traders from other foreign financial institutions which included inappropriate references to the fixing rate submission process," Bank Negara said.
The central bank said it viewed such reporting breaches seriously, "especially on financial institutions' involvement with the offshore ringgit NDF (non-deliverable forward) market or any activities that relate towards market manipulation".
The action could include monetary penalties, issuance of a written order to comply, a public reprimand and a written order to mitigate or remedy such breaches, it said in a statement, without naming the financial institution.
WAR AGAINST NDF MARKET
Bank Negara Malaysia doesn't have control over how banks trade in the NDF (non-deliverable forward) market, but they can take action against alleged rigging of the fixings.
MR NIZAM IDRIS, head of foreign exchange and fixed-income strategy at Macquarie Bank in Singapore.
"This is part of the war against the NDF market,"said Mr Nizam Idris, head of foreign exchange and fixed-income strategy at Macquarie Bank in Singapore. "Bank Negara Malaysia doesn't have control over how banks trade in the NDF market, but they can take action against alleged rigging of the fixings."
Last month, two Australian banks - Macquarie Group and Australia and New Zealand Banking Group - offered to pay fines for "cartel conduct" when trading ringgit foreign exchange contracts out of Singapore in 2011.
The two banks said they offered to pay the fines after the antitrust agency started court proceedings.
Last month, the Malaysian central bank began trying to force currency traders overseas to stop driving the ringgit lower. It demanded that banks sign a commitment to cease trading the ringgit on the offshore non-deliverable forward market.
Trading became thin after the central bank's action, though earlier this month Bank Negara announced measures to boost liquidity and encourage more onshore trade.
The ringgit has slumped 7.7 per cent this quarter, the third-worst performer in Asia, and reached RM4.4823 per US dollar on Dec 12, a level unseen since January 1998. It fell 0.1 per cent to RM4.4792 as of 2.36pm in Kuala Lumpur yesterday.
Bank Negara's efforts to curb speculation come as rising bets for higher US interest rates following Mr Donald Trump's United States election victory erode the appeal of developing-nation assets.
Malaysia's 10-year bond yield jumped to 4.46 per cent on Nov 29, the highest level since September 2008.