KUALA LUMPUR: Malaysia has shot down the United States Treasury Department’s claim that the country is manipulating its currency.
Bank Negara said the economy remained resilient, underpinned by strong economic fundamentals, including the flexibility accorded by a floating exchange rate and strong external balance.
“Malaysia supports free and fair trade, and does not practise unfair currency practices,” it said in a statement yesterday.
Bank Negara was responding to the US Department of Treasury Office of International Affairs placing Malaysia in its monitoring list as one of the countries whose currency practices deserved scrutiny.
The number of countries on the US watch list expanded after Treasury secretary Steven Mnuchin lowered the threshold for qualification.
Countries with a current account surplus equivalent to two per cent of gross domestic product (GDP) are eligible for the list, down from three per cent.
Other thresholds include persistent intervention in markets for a nation’s currency, and a trade surplus with the US of at least US$20 billion (RM84 billion). Countries that meet two of the three criteria are placed on the watch list.
Malaysia is among nine countries on the list, alongside China, Germany, Italy, Ireland, Japan, South Korea, Singapore and Vietnam.
The US Treasury said Malaysia had maintained a significant bilateral goods trade surplus since 2015, registering US$27 billion last year.
However, it said, Malaysia’s current account surplus had narrowed substantially over the past decade on higher consumption and investment, falling to 2.1 per cent of GDP last year.
The US Treasury estimated that Bank Negara had made net sales of foreign exchange of 3.1 per cent of GDP last year and claimed this was to resist the depreciation of the ringgit.
“Malaysia’s external rebalancing in recent years is welcome. The authorities should pursue appropriate policies to support a continuation of this trend, including by encouraging high-quality and transparent investment and ensuring sufficient social spending, which can help minimise precautionary saving.”
Bank Negara dismissed the claim and highlighted Malaysia had adopted a floating exchange rate regime. The ringgit exchange rate is market-determined and is not relied on for export competitiveness.
“Any intervention is limited to ensuring an orderly market and avoiding excessive volatility of the exchange rate that may affect macroeconomic stability.
“In fact, the ringgit has over the years faced multiple episodes of significant appreciation and depreciation points to the flexibility of the exchange rate.”