MALAYSIA: Bank Negara Malaysia (BNM) said it is ready to address any excessive volatility in the ringgit, urging markets to consider looking beyond “short-term currency dynamics.”
In an emailed statement to Bloomberg News, BNM said, “BNM remains vigilant and is ready to offer liquidity when required.”
The central bank highlighted that Malaysia’s “strong fundamentals, positive economic prospects and domestic structural reforms, complemented by ongoing initiatives to encourage flows, will continue to provide enduring support to the ringgit.”
The ringgit dropped by 5.8% against the US dollar in October, marking its steepest monthly decline in about eight years, The Edge Singapore reports.
The currency’s fall came as investors reconsidered their expectations for US interest rate cuts, causing them to avoid riskier assets amid political uncertainty in the lead-up to the US election.
Despite recent declines, the ringgit has been the best performer among emerging market currencies this year, thanks to Malaysia’s economic growth, which has exceeded forecasts, fuelled by domestic demand and investments from major tech companies.
To address its budget deficit, the government also plans to cut blanket fuel subsidies.
This year, Malaysia’s policymakers have encouraged state-linked firms, funds, and private sector firms to bring back earnings held abroad to support the ringgit, which rebounded from a 26-year low in February.
BNM acknowledged that, as a small and open economy, Malaysia’s currency will remain influenced by global financial market trends and short-term currency dynamics.
The central bank stated that its role in the foreign exchange market is to “manage excessive volatility in the exchange rate and ensure orderly market conditions.” /TISG
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