KUALA LUMPUR: Bank Negara Malaysia's (BNM) Financial Markets Committee (FMC) in a statement today said it is not considering capital controls, or restrictions like those introduced during the Asian Financial Crisis (AFC), in response to lingering concerns among ringgit foreign exchange market participants.
FMC chairman and BNM deputy governor Adnan Zaylani said, BNM is not considering capital controls or restrictions like those introduced during the AFC taking into account the potential costs and impact to the economy.
He also reiterated that the current level of the ringgit is deemed undervalued, particularly as Malaysia's economic fundamentals continue to be strong with positive economic prospect.
The statement said the FMC convened today to discuss recent developments in the ringgit foreign exchange market.
It added that the ringgit traded in an orderly manner this morning.
It opened at 4.7475, the same level as Friday's close and moved in tandem with other regional currencies.
As at 5pm, the buying rate for the ringgit against the US dollar, was 4.753.
Since the last FMC meeting on Mar 1, 2024, the FMC said movements of ringgit and regional currencies continue to be driven by global factors, particularly uncertainties surrounding the timing and extent of interest rate adjustments by major central banks.
"This was further evidenced by the stronger-than-expected US labour market data last Friday, indicating a more resilient US economy, and thus increases the risk of the US Fed maintaining interest rates "higher for longer," the statement said.
The FMC said coordinated efforts to encourage more consistent inflows by the government-linked companies (GLCs) and government-linked investment companies (GLICs), as well as greater engagements with Malaysian corporates and businesses led to the ringgit gaining 0.6 per cent since Feb 26, 2024, the only regional currency to have strengthened against the US dollar.
Across the same period, the average daily foreign exchange (FX) volume was US$17.6 billion compared to US$15.5 billion in 2023.
The FMC said higher FX conversion activities in the onshore FX market, were driven by the significant flows arising from coordinated efforts as well as opportunistic selling of US dollar by certain exporters.
It added that the ongoing coordinated efforts can be sustained given that the focus is on investment income and export revenue which are recurring in nature.
In addition, a more sustained ringgit strengthening could spur greater interest for FX conversion by corporates with excess foreign currency holdings, further supporting sentiment on the ringgit.
The FMC was particularly encouraged by BNM's enhanced efforts to further promote FX conversion activities by Malaysian corporates and businesses.
The FMC is a committee established by BNM in May 2016 and comprises representatives from Bank Negara Malaysia, financial institutions, corporations, financial service providers and other institutions which have prominent role or participation in the financial markets.