Bank Negara governor Datuk Seri Abdul Rasheed Ghaffour.
KUALA LUMPUR: Policy certainty, ongoing government reforms and supportive external factors have contributed to the ringgit’s steady appreciation to levels last seen in 2018, says Bank Negara Malaysia (BNM) governor Datuk Seri Abdul Rasheed Ghaffour.
The ringgit traded at 3.9540 against the US dollar at the lunch break yesterday, marking a fresh high since May 15, 2018, when it last stood at the same level, and extending its run of fresh highs.
The currency spiralled to breach the four psychological level at the close on Monday against the greenback.
He said that while both external and domestic factors played vital roles, domestic factors remained the key focus for strengthening economic fundamentals, enhancing competitiveness and sustaining reform measures supportive of long-term growth.
These are the drivers for the ringgit going forward.
“These things are very important, and if we get them right, the outcome is the ringgit becoming more attractive and investments flowing into the country,” he told Bernama in an interview yesterday.
These factors, Abdul Rasheed said, can also be divided into short and long term.
“Short-term factors are like capital flows. They can come in, go out and then flow back in again. Interest rate differentials are also short-term.
“Like now, they may be narrowing. But we don’t know how long before they start widening again,” he said.
Asked about the central bank’s intervention in the foreign-exchange market, Abdul Rasheed said that, regardless of the currency’s direction, the central bank’s objective is to ensure orderly market functioning.
“We don’t set the level of the ringgit. We don’t influence its level. The market determines it,” he said.
“Our role is to ensure an orderly market. We want to ensure sufficient liquidity in the market. This principle guides our presence in the market.”
Solid economic fundamentals, the BNM governor pointed out, will provide long-term support for the ringgit.
“Our fundamentals are solid, whether on the external side, domestic policy or the banking sector, among others. Our economy is also highly diversified,” he said.
Abdul Rasheed explained that implementation of reforms, such as targeted subsidies, is planned and executed in a way that does not disrupt the economy.
He elaborated that the government’s commitment to fiscal discipline, as well as the prospect of the country’s growth, are also contributing factors to the positive momentum. The government is on track to reduce its fiscal deficit to 3.5% of gross domestic product in 2026, from an estimated 3.8% last year.
