Malaysia central bank says may push new measures to deal with forex market volatility

[KUALA LUMPUR] Malaysia's central bank said on Friday it may adopt additional measures to deal with volatility in foreign exchange markets if necessary, as the ringgit currency hovered near 19-year lows.

Malaysia as a net exporter needs to take "prudent steps" to deal with continued global uncertainty and external pressure on the ringgit currency, Bank Negara Malaysia (BNM) Governor Muhammad Ibrahim said, without elaborating on what such steps would entail. "Given the openness of our market, we will always be exposed to uncertainties in global economic developments and geopolitical tensions," he said in his speech at an event.

Last November, BNM began trying to force currency traders overseas to stop driving the ringgit lower and demanded that banks sign a commitment to cease trading the ringgit on the offshore non-deliverable forwards (NDF) market.

It also said it would implement several measures to boost onshore ringgit trade.

Mr Muhammad said on Friday that the central bank's intervention has helped mitigate the "disruptive influence" of offshore ringgit specuation, improve imbalances in the domestic foreign exchange market and reduce ringgit volatility.

The governor added that its decision to compel Malaysian exporters to convert 75 per cent of export proceeds into ringgit will "bring the ringgit value closer to its underlying economic fundamentals".

Mr Muhammad said the current ringgit level does not reflect the fundamentals of the economy.

Malaysia has been hard hit by capital outflows from emerging markets as investors expect US interest rates to rise faster under a Trump administration.

The ringgit has lost more than 16 per cent of its value over the past nine months, hitting a 19-year-low of 4.4980 per US dollar on Jan 4.

REUTERS