Public told to go to banks for forex needs

> Bank Negara seeks to curb NDF market influence, says it is taking measures to reinforce existing rules

PETALING JAYA: Bank Negara Malaysia (BNM) yesterday advised the public to approach licensed banks for their foreign exchange needs, days after speculative trading in the nondeliverable forward (NDF) market threw the ringgit into a spin.

Bank Negara said in a statement that there is no change in foreign exchange administration (FEA) rules and it is taking measures to reinforce existing rules that have been in place to prohibit facilitation of ringgit NDF.

“BNM would like to remind all market participants to observe compliance with the existing FEA rules and the Malaysian licensed banks must avert from facilitating any foreign exchange (FX) transaction that could be related to offshore ringgit NDF market activities,” it said.

Reports state the ringgit’s one-month non-deliverable forwards (NDFs) lost as much as 3.7% from the previous close to 4.5395 per US dollar last Friday.

BNM, however, which does not recognise offshore trading of the ringgit, managed to keep a tight hold on the currency, ensuring minimal movement onshore.

The central bank’s middle rate for the ringgit against the dollar stood at 4.285 on Friday, in comparison. This however, did not stop money changers from changing their rates, with some offering to buy the dollar at 4.24 and sell at 4.37 on Friday.

“Malaysia’s FX market remains open and BNM stands ready to provide liquidity if necessary to ensure an orderly market. Malaysia continues to welcome real investments and provide all avenues for FX transactions and hedging requirements onshore,” BNM said.

Foreign fund and asset managers have also been advised to contact Malaysian licensed banks for advices and execution of any foreign exchange transactions. All Malaysian licensed banks will continue to facilitate customers’ requests for foreign exchange services subject to compliance with FEA.

The latest move by the BNM is in keeping with comments made by governor Datuk Muhammad Ibrahim on Friday, who said the ringgit should not be determined by speculative positioning, like in the NDF market.

The central bank said as the ringgit is a non-internationalised currency, prices should be fully determined by onshore financial market transactions that are driven only by the fundamentals and genuine trade and investment activities in Malaysia.

“Our ringgit level must be supported and dictated by the underlying transaction as contracted by banks,” Muhammad told a press conference in Kuala Lumpur last Friday after announcing the country’s third quarter economic performance.