Ringgit stable versus US$, forex volatility reduced

KUALA LUMPUR: The ringgit continues to remain stable against the US dollar while the exchange rate volatility has reduced over the past two months since the Dec 2 implementation of measures to develop the onshore financial market, says the Financial Markets Committee.

The FMC said on Friday the movements were comparable to other regional and major currencies that are currently influenced by developments in the US financial market and expectations of interest rate hikes by the Federal Reserve in 2017. 

“The onshore foreign exchange (FX) market continues to register a daily average volume of US$9.1bil across all types of FX transactions. The ringgit currency pair traded at a daily average transaction volume of US$5.2bil, of which the spot and forward transactions averaged US$2.3bil daily. 

The FMC said the average intraday movement narrowed to around 53 points in January 2017 from an average of 82 points in December last year.

The FMC is a committee established by Bank Negara Malaysia in May 2016 and comprises representatives from BNM, financial institutions, corporations and financial service providers.

As for the bond market, the FMC said it was well supported by institutional investors and financial institutions as the primary auctions received strong bid-to-cover ratios of above two times for the last three bond issuances. 

“Non-resident holdings of long-term government bonds stood at 29.6% of total outstanding in January 2017, similar to levels of non-resident holdings in January last year. The secondary market volume also recorded a sustainable volume of RM3.6bil daily,” it said.

The FMC said since the implementation of the measures on Dec 2, there was an improvement as indicated by the volume of trading activities in the forex market. 

A total of US$37bil of forex transactions in relation to exports and imports of goods took place in Janaury to Feb 15.

“BNM data also indicates an improved balance between exports and imports foreign exchange flows, consistent with the trade surplus in the current account. 

“For the months of December 2016 and January 2017, since the measures were introduced, exports conversion exceeded imports by USD372.9 million and USD741.3 million respectively.

“BNM and FMC will continue to monitor the progress and the feedback from the public on the initiatives and engage all stakeholders to ensure successful implementation of the initiatives, while creating a conducive and orderly financial market environment to facilitate business activities in support of the economy,” it said.

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