Ringgit finding its right level, says Bank Negara governor

KUALA LUMPUR: The ringgit is finding its right level now, more reflective of the Malaysian economy and the fundamentals, said Bank Negara Malaysia governor Tan Sri Muhammad Ibrahim.

“There is better liquidity in the onshore foreign exchange market now, and the ringgit is now reflective of real economic activities in the financial market and not speculative,” said Muhammad at a briefing on the third quarter gross domestic product results, here, yesterday.

He said following the measures rolled out by the central bank in December last year and also early this year, ringgit volatility had declined and the currency now stood as one of the best performing currencies in the region for two consecutive quarters.

The ringgit opened trading at RM4.1725 versus the US dollar yesterday. It closed at 4.1640 from Thursday’s close of 4.1760 after hitting an intra-day low of 4.1563.

The ringgit continued to appreciate against the greenback and most regional currencies in the third quarter, but risks persist going forward.

“The currency has been supported by positive domestic developments, however, risks persist on geopolitical tensions between the United States and North Korea, as well as economic outlook for major economies,” said Muhammad.

On the interest rate, he said the rate was being normalised as with many other central banks in the world, in response to the normalisation decision by the US Federal Reserve Fund.

Last week, Bank Negara stood pat with the Overnight Policy Rate at 3.00 per cent, but also said it would likely review the current monetary policy.

Explaining the latest monetary policy statement further, Muhammad said it did not hint at a tightening cycle as interpreted by the research houses.

“Once the economic growth is entrenched and expectations of it being positive, inflation within our expectations and financial imbalances not having increased significantly or a problem, that gives us a bit of flexibility to adjust the degree of monetary policy accommodativeness.”

With the economic factors in place, that would give the central bank some flexibility, he added.

He said the Malaysian economy now stood at a position of strength and that provided the Malaysian authorities more flexibility.

Interest rates had been in the negative range for a year now, but Muhammad said it was not abnormal. “If it is too long, it will be a concern.”

The next monetary policy committee will be held in January.

On cryptocurrency, he said the central banks had targeted to come up with guidelines in a month and said it would cover, among others, anti-money laundering and terrorist financing.

Meanwhile, the latest Financial Conditions Index for Malaysia as at end-September indicated that there was decreased volatility in the foreign exchange and equity markets since last year.