BNM: Ringgit will rise when foreign uncertainty subsides

KUALA LUMPUR: The Malaysian ringgit’s performance will improve when uncertainties from global market developments subside, reflecting Malaysia’s sound economic fundamentals, Bank Negara Malaysia said.

the movements in the ringgit would continue to be market-determined and Bank Negara would continue to manage the risks. Its market operations will ensure sufficient liquidity and the orderly functioning of financial markets, it told Bernama.

Bank Negara said it had done a good job of managing risks from external shocks and dealing with a strong greenback but an unexpected US government debt limit has induced more volatility in the markets.

Besides the ringgit, other Asian currencies have also been affected, it said.

Developments weighing down on market sentiment include the US debt ceiling impasse and episodes of stress in the US and European banking sectors.

This has led to an increase in demand for safe-haven assets such as the US dollar and outflows from most emerging market economies as investors seek to protect their investments. This has led to the US dollar strengthening against most currencies.

The strong US dollar will likely continue in the near future and economies need to brace for another round of rough currency markets, Bank Negara said.

Last year, the aggressive interest rate hike by the US Federal Reserve (Fed) was the main factor in the weakening of the currency market, including the ringgit, as the US dollar is seen to be giving better returns from an interest rate differential point of view.

Bank Negara said it was important to consider the overall performance of the ringgit in relation to not only the US dollar but also the currencies of other significant trading partners. It said the movement of the ringgit against other major trade partners has been relatively muted.

Malaysia’s economy is expected to continue expanding within the range of 4%–5% in 2023.

Domestic demand will continue to drive growth, supported by the continued recovery in the labour market and the realisation of approved multi-year investment and capital projects, including approved foreign direct investments such as the East Coast Rail Link (ECRL), LRT Shah Alam Line or LRT 3, and Pan Borneo Highway.

At the same time, Malaysia’s diversified export markets and product segments will continue to support the resiliency of the external sector.