Market to determine ringgit movements, says BNM

RINGGIT movements will continue to be market determined despite the Malaysian currency weakening to a 24-year low, says Bank Negara Malaysia (BNM).

In a statement today, the central bank said it continues to closely monitor and ensure orderly financial markets condition amid external developments that have led to persistent strength in the US dollar against almost all currencies, including the ringgit.

The US dollar has strengthened significantly due to aggressive monetary policy tightening in the US, it said.

“Malaysia remains an open economy. Rather than resorting to capital controls or re-pegging of the ringgit, the policy priority now is to sustain economic growth in an environment of price stability and to further strengthen domestic economic fundamentals through structural reforms. This will provide a more enduring support for the ringgit,” said BNM governor Tan Sri Nor Shamsiah Mohd Yunus.

BNM said the tighter global financial conditions and higher volatility in the foreign exchange (forex) markets are not expected to derail Malaysia’s economic growth, noting that the economy expanded by 8.9% in the second quarter and will continue to be driven by further improvements in labour market conditions and higher tourism activity.

Exports are underpinned by our highly diversified products and markets. The domestic financial system is well capitalised with ample liquidity, and financial intermediation continues to be supportive of the economy, the statement added.

On the ringgit movements, BNM said the forex market continues to function and intermediate effectively. It noted that daily onshore forex transaction volume has been increasing throughout, reaching a current average of US$13.3 billion (RM60.78 billion) against US$11.3 billion in 2021, amid two-way flows.

On the bond market activity, it said it remains healthy, and well supported by institutional investors and financial institutions. The central bank said its market operations will ensure sufficient liquidity and orderly functioning of financial markets. — TMR/graphic by TMR