BNM measures show success
MORE LIQUIDITY: Disruptive influence of NDF market on ringgit has subsided
THE disruptive influence of the non-deliverable forward (NDF) market on the ringgit has eased, said Bank Negara Malaysia (BNM).
This makes a success of Bank Negara’s efforts to curb the local currency’s offshore trade.
Bank Negara said yesterday there is more liquidity in the onshore foreign exchange market.
The onshore foreign exchange market recorded a higher daily average volume of US$9 billion (RM40.34 billion) across all foreign exchange transactions this month, compared with the average of US$8 billion from January to last month.
“The disruptive influence from the NDF market has also subsided. Against the backdrop of a stronger US dollar and continued uncertainties, the ringgit’s intra-day movement averages around 90 points compared with 228 points in November and a high of 600 points (measured through difference between the highest and lowest exchange rate in the interbank market during the day).
“Foreign exchange flows comprise supply and demand from all major participants, including the exporters/importers, portfolio-related and direct investments,” said Bank Negara’s Financial Markets Committee in a statement yesterday.
Early this month, Bank Negara announced new measures to spur more domestic trade of the ringgit. They included allowing exporters to only retain up to 25 per cent of export proceeds in foreign currencies, while higher balances would need its approval.
It also allowed residents to hedge and manage foreign exposure with onshore banks, subject to prudential limits, while resident and non-resident fund managers can freely and actively manage foreign exchange exposure up to 25 per cent of invested assets. The new measures took effect on December 5.
Bank Negara said as the demand and supply of the US dollar/ringgit realigned, onshore foreign exchange market would further stabilise, leading to better cost of hedging and facilitating businesses in managing their foreign exchange risks.
The central bank noted that the financial market has responded positively to the fund manager’s hedging framework. It allowed registered fund managers to actively manage up to 25 per cent of their invested portfolio.
To date, 10 fund managers, consisting of both residents and nonresidents, registered with Bank Negara, with a total asset under management eligible under the framework of RM41.8 billion.
“Fund managers have started to utilise this flexibility,” it said.
In the secondary bond market, it said there continues to be two-way flows from both resident and nonresident investors, with average bidoffer spread of three basis points for benchmark securities.
Bank Negara said trading activities remain robust with average daily trading volume of RM4.5 billion and month-to-date volume of RM52.8 billion.
Resident companies recorded net trade inflows under goods in excess of RM2 billion this month compared with the cumulative net outflows under goods from January to last month.
In addition to maintaining 25 per cent of export proceeds in foreign currencies, exporters were allowed to reconvert their export proceeds to meet up to six-month forward projection of their loans and imports obligations, it said.
Bank Negara said the December data indicated that around 57 per cent of the proceeds were reconverted for this purpose, while the remaining proceeds in ringgit enjoyed a return of 3.25 per cent.