BNM may take action to tackle low ringgit

KUALA LUMPUR • Malaysia's central bank said yesterday it may adopt additional measures to deal with volatility in foreign exchange markets if necessary, as the ringgit hovered near 19-year lows.

Malaysia as a net exporter needs to take "prudent steps" to deal with continued global uncertainty and external pressure on the ringgit currency, Bank Negara Malaysia (BNM) governor Muhammad Ibrahim said, without elaborating on what such steps would entail.

"We will always be exposed to uncertainties in global economic developments and geopolitical tensions," he said.

In November, BNM began trying to force currency traders overseas to stop driving the ringgit lower and demanded that banks sign a commitment to cease trading the ringgit on the offshore non-deliverable forwards (NDF) market.

It also said it would implement several measures to boost onshore ringgit trade.

Mr Muhammad said yesterday that the central bank's intervention has helped mitigate the "disruptive influence" of offshore ringgit speculation, improve imbalances in the domestic foreign exchange market and reduce ringgit volatility.

The governor added that its decision to compel Malaysian exporters to convert 75 per cent of export proceeds into ringgit will "bring the ringgit value closer to its underlying economic fundamentals". He said the current ringgit level does not reflect the fundamentals of the economy.

Malaysia has been hard hit by capital outflows from emerging markets as investors expect US interest rates to rise faster under a Trump administration.

The ringgit has lost more than 16 per cent of its value over the past nine months, hitting a 19-year-low of 4.498 per US dollar on Jan 4.

Separately, Malaysia's sovereign wealth fund Khazanah Nasional Bhd said the value of its portfolio fell 3.4 per cent last year due to weakness in equity markets and emerging market currencies. Its portfolio value fell to RM145.1 billion (S$46.4 billion) last year from RM150.2 billion in 2015.

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 14, 2017, with the headline 'BNM may take action to tackle low ringgit'. Print Edition | Subscribe