KUALA LUMPUR – Despite the US dollar having a stronger environment, Malaysia’s ringgit has remained generally stable against the country’s other key trading partners’ currencies.
According to Bank Negara Malaysia (BNM) governor Tan Sri Nor Shamsiah Mohd Yunus, the ringgit nominal effective exchange rate (NEER) for the second quarter of the year had a marginal depreciation of 0.1%.
She said that Malaysia’s ringgit cannot be much stronger than the major trade partners as it would affect the country’s competitiveness as well as the other currencies that are weaker than the US dollar.
“We must move away from our fixation on a bilateral exchange rate and look at it from a broader perspective; one way to do this is through the NEER,” she added during the recent press conference announcing Malaysia’s Q2 2022 GDP performance.
Nor Shamsiah explained that the US dollar had strengthened due to global financial market conditions which are still tightening as a result of policy rate increases by major central banks with the US Federal Reserve (Fed) raising its federal fund rate by 200 basis points (bps) year-to-date.
She also added that the 10-year Malaysia Bond Market (MGS) jumped by 36.5 bps in unison with the rise in global and regional bond yields although the MGS yields have been trending lower since July 1 of this year.
In this difficult situation, domestic financial markets will continue to see periods of elevated volatility, she stated and added that the spillovers to domestic financial intermediation are anticipated to be largely controlled, bolstered by Malaysia’s healthy external position as well as strong banking sector.
Malaysia’s ringgit had declined by 4.6% against the greenback in Q2 2022, while year-to-date (as at Aug 10) shows a 6.3% depreciation.
This is broadly in line with the movement of Asian currencies which posted a depreciation of 4.7% and 5.8% for Q2 and year-to-date respectively.
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