Malaysia Central Bank Ready to Curb Ringgit Volatility Amid Global Uncertainty

Malaysia's central bank, Bank Negara Malaysia (BNM), has reiterated its commitment to managing risks and maintaining orderly market conditions for the ringgit, the country's currency. In a statement, the central bank emphasized its readiness to use operational policy instruments to ensure the ringgit's stability, despite global uncertainties and volatility in foreign exchange markets.



The ringgit has been under pressure in recent months, driven by global developments such as the strengthening of the US dollar and uncertainty surrounding China's economic growth. Regional currencies, including the Japanese yen, Thai baht, Korean won, Chinese renminbi, and Philippine peso, have also experienced downward trends against the US dollar this year. However, the ringgit's performance has been in line with other ASEAN currencies, with a depreciation of 7.3% against the US dollar as of November 2, 2023.



BNM Governor Datuk Seri Abdul Rasheed Ghaffour has stated that the central bank will continue to monitor global developments and stand ready to manage any spillover to domestic markets, including ensuring sufficient liquidity in the domestic foreign exchange market. The central bank has also welcomed Malaysia's removal from the US currency monitoring list, affirming the ringgit's market-driven status.

The narrowing of interest rate differentials between Malaysia and major economies has been positive for the ringgit's volatility and investment attractiveness. This narrowing reduces the incentive for capital outflows, making Malaysia's investment environment more attractive to foreign investors. Additionally, a smaller gap between domestic and foreign interest rates leads to a more stable exchange rate for the ringgit, benefiting businesses and investors alike.

In the long term, the ringgit's performance is expected to be influenced by factors such as the restoration of world market stability, improvement in investor sentiment, and excess foreign exchange receipts generated by Malaysia's core economic activities. Strong domestic growth and momentum from ongoing government reforms are also expected to benefit the ringgit.

Malaysia's central bank is committed to maintaining the ringgit's stability and ensuring orderly market conditions. With the bank's readiness to intervene in the foreign exchange market and manage risks from domestic and external developments, investors can have confidence in the ringgit's future prospects. As global uncertainties persist, the central bank's vigilance and preparedness will be crucial in navigating the challenges ahead and supporting Malaysia's economic growth.