KUALA LUMPUR: The ringgit would not hit the 5.0 level against the US dollar because Malaysia is not experiencing any form of crisis.
Bank Negara Malaysia (BNM) assistant governor (AG) Adnan Mohamad Zahid said the central bank does not see any concerning trends or speculative pressure; thus, the 5.0 level will certainly not happen and is unrealistic.
"When we went through levels from 2.5 to 3.0, then 4.0, we were in a crisis. But now, we are not in a crisis.
"So there is not a reason to be hung up over the dollar-ringgit level,” he said in a panel discussion titled ‘Navigating Ringgit Exchange Rate Dynamics’.
The event was held in conjunction with today’s one-day BNM Sasana Symposium 2023 themed Structural Reforms, For A Stronger Malaysia.
Adnan said that although the central did see some residents wanting to invest abroad, exporters just holding back from conversion, or importers at the margin looking to buy forward a little faster, these would be managed well within BNM’s capabilities in managing the reserves.
"Of course, we will continue to see fluctuations in the ringgit-dollar, but we do not see the ringgit heading anywhere in that (5.0 level) direction.
"Maybe we will hit 4.0 if we could turn around quickly. We can go there,” he said.
Meanwhile, looking at the overall ringgit in a nominal effective exchange rate (NEER), Adnan said the ringgit is relatively stable despite the banking and debt ceiling crises in the United States (US) and the weakness in the Chinese economy, given the high correlation between Malaysia and China, with exports to China accounting for 13.6 per cent Malaysia’s total exports.
He said the local financial market remains on a solid footing because large parts of the country’s investors are confined within the official institutions, pension funds, insurance companies and asset management companies.
"Most of them are managing their portfolios against global bond indices. Therefore it is important for the country to continue some policymaking and carry out some necessary reforms so that our bonds remain attractive to foreign investors,” he said.
Meanwhile, Standard Chartered Bank Malaysia head of Financial Markets, Sylvia Wong, said from the commercial and private sector’s perspective, Malaysia is generally still considered a good destination for investment for foreign investors given the current account surplus, ample trade -- RM1.6 trillion in exports in 2022 --, flexible liquidity in capital markets and ease of doing business, among others.
"However, from money managers’ view, the approach is usually more short term rather than from a medium and long-term perspective, where firstly, they tend to look at risk-on or risk-off, and that is a macro condition.
"For example, the US banking crisis is risk-off. Secondly, they examine emerging markets (EM) versus developed markets (DM) and whether they can get better yields and returns from EM or DM.
"Thirdly, they will see the fixed income or equity. So, generally, money managers tend to go around these three main themes and the differences between one to the other, depending on the timing and what drives the flows,” she said.
Wong said the private sector hopes for stability and wants the real economy to grow while able to help other industries to expand as well. - Bernama