Inclusion in US currency manipulator list has no impact on economy, says BNM

According to the central bank, the Malaysian economy remains resilient, supported by strong economic fundamentals


There are no repercussions to Malaysia’s economy from the country’s inclusion in the US Treasury’s monitoring list of potential currency manipulators, according to Bank Negara Malaysia (BNM).

In a statement yesterday, the central bank emphasised that the Malaysian economy remains resilient, supported by strong economic fundamentals, including the flexibility accorded by a floating exchange rate and strong external balance.

“Malaysia supports free and fair trade, and does not engage in unfair currency practices.

“Malaysia adopts a floating exchange rate regime. The ringgit exchange rate is market-determined and is not relied upon for exports competitiveness,” it said.

Malaysia is among nine countries in the list, along with China, Germany, Italy, Ireland, Japan, South Korea, Singapore and Vietnam.

The number of countries on the watchlist expanded after US Treasury Secretary Steven Mnuchin lowered the threshold for qualification.

The new threshold includes countries with current-account surplus equivalent to 2% of GDP, down from 3% previously.

Other criteria includes persistent intervention in markets for a nation’s currency, and trade surplus with the US of at least US$20 billion (RM83.9 billion).

Countries that meet two of the criteria are placed on the watchlist and Malaysia fulfils two out of three criteria listed.

Malaysia has maintained a significant bilateral goods trade surplus with the US since 2015, registering US$27 billion last year, while current- account surplus stood at 2.1% of GDP.

As acknowledged by the Report on Macroeconomic and Foreign-Exchange (forex) Policies of Major Trading Partners of the US, BNM’s intervention over the last few years has been in both directions of the forex market.

“Any intervention is limited to ensuring an orderly market and avoiding excessive volatility of the exchange rate that may affect macroeconomic stability.

“The fact that the ringgit has over the years faced multiple episodes of significant appreciation and depreciation, points to the flexibility of the exchange rate,” it noted.

The central bank added that as a small and open economy, Malaysia’s current account of balance of payments is affected by both internal and external developments, including cyclical and structural factors.

“About half of Malaysia’s trade surplus is driven by commodity exports, which is largely influenced by global demand and supply, as opposed to the exchange rate,” it said.

BNM said the current account surplus is reflection of the diversified nature of the Malaysian economy.

US President Donald Trump’s administration has recently embarked on currency policy, which is deemed as the latest tool to rewrite global trade rules that have hurt American businesses and consumers.

The semi-annual forex report was issued amid the escalating trade conflicts between the US and China.

Washington’s increasing tariffs on US$200 billion worth of Chinese goods on May 10 was quickly met by Beijing, that retaliated with targeted tariffs of their own as the world’s two largest economies traded blows.

Subsequently, Trump announced an export ban on Chinese multinational Huawei Technologies Co Ltd which, should it materialise, could see China resorting to non-tariff measures.