Ringgit’s drop towards 26-year low spurs BNM to pledge support

MALAYSIA’S central bank reaffirmed it is ready to support the ringgit, which is hovering close to the lowest level since 1998.

Bank Negara Malaysia (BNM) will ensure the “orderly functioning of the foreign exchange market” with support from government-linked firms, corporations and exporters to attract flows and liquidity into the market, according to a statement from the central bank released on Monday (Apr 15).

The ringgit slipped as much as 0.2 per cent to 4.78 per US dollar on Monday, putting it within a whisker of the Feb 21 low of 4.8053, which was the weakest since January 1998. Still, the ringgit is outperforming regional peers such as the South Korean won, Philippine peso and Taiwan dollar so far on Monday.

The ringgit had pulled back from its February lows after BNM announced in early March it would encourage state-linked firms to repatriate foreign investment income and convert it into the local currency more consistently.

Malaysia’s currency has been dragged down by broad strength in the US dollar amid bets the Federal Reserve will keep interest rates higher for longer, and from haven flows triggered by escalating Middle East tensions. The sluggish economic outlook for China, Malaysia’s largest trading partner, has also weighed on the ringgit.

The country is not alone. Investors are watching for signs of further intervention from many emerging-market central banks – including China, Korea, Thailand, Poland and Indonesia – all of which have seen their local currencies pummelled by the recent US dollar rally. BLOOMBERG

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