Bank Negara Malaysia’s (BNM) initiatives have helped alleviate pressure on the ringgit, leading to a 0.5 percent appreciation of the local currency on a nominal effective exchange rate (NEER) basis, said the central bank’s governor.
Datuk Abdul Rasheed Ghaffour, speaking at a press conference on Friday (May 17) during the announcement of the first quarter 2024 gross domestic product figures, noted that from the beginning of the year until May 15 this year, the ringgit had depreciated by 2.4 percent against the US dollar, in line with the movements of other regional currencies.
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Datuk Abdul Rasheed Ghaffour, speaking at a press conference on Friday (May 17) during the announcement of the first quarter 2024 gross domestic product figures, noted that from the beginning of the year until May 15 this year, the ringgit had depreciated by 2.4 percent against the US dollar, in line with the movements of other regional currencies.
Read more at https://tinyurl.com/3kexwe38
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NewsTranscript
00:00 In 2024, the US dollar continued to display strength amid the shifting expectations of
00:06 the US Fed Reserve's monetary policy path and the heightened geopolitical risk.
00:12 These global currency market dynamics have led to pressure on most regional currencies
00:18 including the Ringgit, which has depreciated against the US dollar by 2.4% a year to date,
00:24 as of 15 May.
00:25 To put this into perspective, if you look at the Ringgit's performance as shown in
00:31 the dark red line in the chart, it is actually within the upper range among the regional
00:36 currencies as you can clearly see from the chart here.
00:40 And against this backdrop, the bank's market operations will continue to ensure sufficient
00:46 liquidity and the orderly functioning of the foreign exchange market.
00:51 To manage the short-term pressures on the Ringgit, the government and Bangkok Malaysia
00:56 have taken a number of coordinated actions to encourage consistent flows into the forex
01:01 market.
01:03 And this includes encouraging the repatriation and conversion of foreign investments by GLCs
01:09 and GLEECs, and second, stepping up discussions with corporates and exporters to convert their
01:16 proceeds and overseas investment income in a more consistent and timely manner, which
01:22 we will continue to monitor.
01:26 All these coordinated actions have helped cushion the pressure on the Ringgit despite
01:31 the strength of the US dollar out of late.
01:34 We have seen improvements in the domestic foreign exchange market.
01:39 For example, against the US dollar, the Ringgit depreciated by 1.6% from 26 February to 15
01:47 May.
01:48 And meanwhile, if you look at the Ringgit NER, which actually measures the Ringgit's
01:52 performance against major trading partners, it has depreciated by 2.5%.
01:58 And when compared to regional currencies, the Ringgit has also performed relatively
02:02 well, ranking within the upper range against the US dollar.
02:06 The daily forex trading volume has also increased alongside a narrower bid-ask spread, indicating
02:14 improved liquidity in the domestic forex market.
02:20 And we expect these flows can be sustained over time, given that these investment income
02:25 and export revenue are actually recurring in nature.
02:28 And additionally, another initiative that we are working on is to pilot a fast-track
02:34 pre-approval framework for corporates who bring back foreign currency funds and convert
02:39 them into Ringgit, to enable them to reinvest abroad when the time comes.
02:45 This aims to address frictions raised by corporates during our engagement with them.
02:49 We have responded by giving this flexibility.
02:52 I'm Hee from Sincio Daily.
02:54 Currently, the Ringgit has rebound.
02:56 Will the bank and government take further actions to ensure the Ringgit remains stronger?
03:03 I have a question regarding the non-interest rate measure.
03:07 Do you think this is the best tool to support Ringgit?
03:10 And I can see, although the Ringgit has improved, but it's still hovering around 470 level against
03:18 the greenback.
03:20 So in order for it to rebound further, do you think there's a need to increase the daily
03:28 trading volume?
03:29 I think first, in terms of Ringgit, the pressure on Ringgit has actually come down, especially
03:37 if you look in terms of from when we started our coordinated actions.
03:40 I think you can see from the slides here.
03:43 We started our coordinated actions from 26th of February, and that brought a number of
03:49 positive outcomes.
03:50 What we have done is that, number one, the government of Banggara Malaysia, we, number
03:55 one, encouraged the penetration of conversion of foreign investment income by GLC and GLEECS.
04:02 And we actively engaged the corporates and exporters to convert their export proceeds
04:07 and foreign investment income.
04:10 And we also monitor in terms of the conversion of export proceeds and import payments.
04:15 So all this has actually contributed to strengthening of the Ringgit.
04:19 We look in terms of Ringgit performance against US dollar, depreciated by 1.6%.
04:25 Secondly, in terms of since 26th of February, and in terms of the nominal effective exchange
04:32 rate, that also depreciated by 2.5% since our coordinated action.
04:37 And the forex market trading volume has also increased to about 17.6 billion during that
04:44 period as compared to 15 billion before we started the coordinated action.
04:49 And even the US dollar, Ringgit, with our spread, has also narrowed to about 39% in
04:55 point as compared to before.
04:58 So these are all the positive factors that we are seeing from the coordinated action
05:04 that Banggara undertake with the government.
05:08 In terms of your questions with regard to whether the non-interest rate measure is effective,
05:15 so far it has been effective from what we are doing.
05:17 As I highlighted just now, with regard to the coordinated action that we have undertaken.
05:23 And the interest rate measure is something that may not be appropriate to actually address
05:30 Ringgit issue.
05:32 Because I think, as I mentioned earlier, the monetary policy position of Banggara is that
05:38 in terms of how does he have, in terms of the outlook for growth and also profitability.
05:44 So that's the main focus for interest rate setting, monetary policy and OPR.
05:48 So not so much in terms of Ringgit.
05:52 And you mentioned that Ringgit is still hovering between 468, 470.
05:58 There is actually improvements because if you look in terms of from where we were before
06:03 we started the coordinated action, it was higher.
06:06 And you must also take into consideration that actually the pressure since then has
06:10 been even higher, given the shift in terms of the expectation of the fund rate, that
06:18 it may be higher for longer.
06:21 Despite that shift in sentiment, Ringgit has not depreciated as much.
06:26 And this is so clearly seen if you look at the performance of Ringgit.
06:30 If you look at the regional level, due to date, Ringgit is about the middle, about fourth
06:37 in the region.
06:38 You can see from the slide.
06:41 And if you look from February that we started the coordinated action, Ringgit has been the
06:46 best performer as compared to the other regional currencies.
06:49 So this is the impact in terms of what we have seen from the coordinated action undertaken
06:54 by both government and Banggara.
06:56 [END]