Hornbill Unleashed

March 24, 2017

BNM: Ringgit will stabilise gradually, no large outflow

Filed under: Politics — Hornbill Unleashed @ 8:01 AM

Muhammad-Ibrahim-bnmMeasures undertaken by Bank Negara Malaysia have not only helped stem the ringgit’s decline but have also gradually stabilised the currency, says BNM governor Muhammad Ibrahim.

“The impact of measures announced (on Dec 2, 2016) has been significant, and the ringgit has been very stable the last two months and the volatility has improved as well,” he said.

The ringgit is now at 4.43-4.42 versus the US dollar and will improve, he said, adding that volume in the foreign exchange market had also increased to between US$8 billion and US$9 billion.

“The market would (eventually) reflect more closely the fundamental value.

“It will take some time and we don’t want the adjustment to be overnight. We want it to be gradual,” he told a senior editors’ briefing yesterday, ahead of the release of the central bank’s 2016 annual report today.

Among the significant measures introduced on Dec 2 was to ask exporters to convert 75% of their export proceeds into ringgit.

“But we did this based on merits … if say the exporters need more dollars … we will give approval on a case by case basis,” he said.

Conversion of export proceeds year to date stood at RM2 billion compared with RM500,000 in 2016 and RM8.4 billion in 2015, he said.

Muhammad added that he did not expect a large outflow of funds.

“The major non-resident participants in the market, I think, have done the rebalancing of their portfolio in the last few months. We don’t expect a big outflow from their portfolio. Basically, it won’t be as large as in the last two months.”

He said that rebalancing portfolio was common in the marketplace.

“We are also big investors in the international market. Every time there is a change in the interest rate policy, we will rebalance our portfolio.”

The same goes for non-resident participants, he said.

“They will rebalance their portfolio and (sell down) some of their holdings in Malaysia, take the money out to invest in other markets, resulting in reduced demand for the ringgit.”

He said the level of foreign holdings in the bond market was at one time as high as 34.7% but was now about 25%.

“By pure experience, I can say non-resident participation of about 15-20% in the bond market is more stable. If the participation is about 30-35%, it can cause instability.”

Source : @ Bernama


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