KUALA LUMPUR – The ringgit was the only regional currency that strengthened against the US dollar, gaining 0.6% against the greenback since February 26, Bank Negara Malaysia said.
In a statement, the central bank noted that across the same period, the average daily foreign exchange volume surged to US$17.6 billion compared to US$15.5 billion in 2023.
The statement, issued after the Financial Markets Committee (FMC) convened a meeting today, noted that the uptick in FX conversion activities in the onshore FX market has been attributed to the coordinated efforts and opportunistic selling of USD by certain exporters.
Members of the FMC noted that this morning, the ringgit traded in an orderly manner, opening at 4.7475, the same level as Friday’s close, and moving in tandem with other regional currencies.
Among other matters, the meeting discussed the impact of the ongoing coordinated efforts to encourage more consistent inflows by government-linked companies and government-linked investment companies, as well as greater engagements with Malaysian corporates and businesses.
“The meeting views that the ongoing coordinated efforts can be sustained given that the focus is on investment income and export revenue, which are recurring in nature,” the statement read.
“In addition, a more sustained ringgit strengthening could spur greater interest for FX conversion by corporates with excess foreign currency holdings, further supporting sentiment on the ringgit.”
BNM said since the last FMC meeting on March 1, the movements of ringgit and regional currencies have been influenced by global factors, particularly uncertainties surrounding the timing and extent of interest rate adjustments by major central banks.
A notable development discussed during the meeting was the stronger-than-expected US labour market data released last Friday, indicating a more resilient US economy.
This raises concerns about the US Federal Reserve maintaining interest rates “higher for longer.”
Despite this, market expectations remain for the Fed to lower interest rates in the second half of 2024, BNM said.
FMC chairman and Bank Negara Malaysia Deputy Governor Adnan Zaylani said the current level of ringgit is deemed undervalued, particularly as Malaysia’s economic fundamentals continue to be strong and the economic prospect is positive.
In response to lingering concerns among market participants, he also suggested that the central bank would not peg the ringgit against the dollar, as it has done in the past.
“BNM is not considering capital controls or restrictions like those introduced during the Asian Financial Crisis, taking into account the potential costs and impact to the economy.”
Meanwhile, Bernama reported that earlier today, the ringgit ended lower against the US dollar as the greenback strengthened following higher-than-expected US nonfarm payroll data.
At 6pm, the ringgit eased to 4.7505/7545 against the US dollar from last Friday’s close of 4.7460/7490. – April 8, 2024