Ring­git off­shore NDF trad­ing de­clines 70pc af­ter BNM mea­sures

New Straits Times - - Business -

KUALA LUMPUR: Malaysia is suc­ceed­ing in snuff­ing out cur­rency spec­u­la­tion — now it has to deal with the fall­out.

Off­shore trad­ing in ring­git non­de­liv­er­able for­wards (NDFs) had slumped by about 70 per cent since the cen­tral bank took steps last Novem­ber to de­ter for­eign banks from trad­ing the con­tracts, ac­cord­ing to EBS Bro­kerTec’s elec­tronic-trad­ing plat­form. Now, of­fi­cials are look­ing at eas­ing rules on the short-sell­ing of gov­ern­ment debt af­ter the crack­down saw global funds with­draw more than RM35 bil­lion out of Malaysian sov­er­eign bonds in the four months through last month.

Spurred by an uptick in ring­git volatil­ity in the sec­ond half, Bank Ne­gara Malaysia’s cam­paign is bit­ing af­ter lo­cal lenders were told not to fa­cil­i­tate cur­rency trans­ac­tions re­lated to off­shore ring­git mar­ket ac­tiv­i­ties. Af­ter slid­ing to a 19-year low in Jan­uary, the ring­git has clawed back, trad­ing near a four-month high as swings abate. One-month im­plied volatil­ity on the cur­rency fell to the low­est level since 2014 this month, while the ring­git’s 1.5 per cent ad­vance this year trails gains for its peers in Thai­land, In­dia and South Korea.

The plan to al­low firms and in­sur­ers to short sell sov­er­eign bonds was aimed at deep­en­ing the do­mes­tic fi­nan­cial mar­kets and re­viv­ing in­ter­est in debt, said as­sis­tant gov­er­nor Ad­nan Zay­lani Mo­hamad Zahid last week. The cen­tral bank con­tin­ued to pro­vide liq­uid­ity to the ring­git mar­ket, which was still ad­just­ing to the curbs, he said. The au­thor­i­ties have set a three- to six-month time­frame for sta­bil­i­sa­tion.

A Bloomberg in­dex of Malaysian lo­cal sov­er­eign debt has climbed 1.6 per cent this year, ver­sus a 5.6 per cent jump in a sim­i­lar gauge for emerg­ing-mar­ket gov­ern­ment bonds.

While ring­git NDF trad­ing lan­guishes, mar­kets else­where are brisk. Trad­ing in NDFs on the In­dian ru­pee, South Korean won and Tai­wan dol­lar had shown “sig­nif­i­cant year-on-year growth”, on EBS’s trad­ing plat­form, said Ward. Asian cur­rency NDF trad­ing has been around since the 1990s, ac­cord­ing to the Bank for In­ter­na­tional Set­tle­ments. Bloomberg

BLOOMBERG PIC

The ringggit claws back af­ter slid­ing to a 19-year low in Jan­uary.

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