KUALA LUMPUR: Market players and participants must avoid contributing to the downward pressure on the ringgit and instead should stay composed and play a stabilising role in riding out the current highly dynamic situation, said Bank Negara Malaysia (BNM) deputy governor Adnan Zaylani.
He said the central bank closely watches market and public sentiment, realising how sentiment can also drive traders' quoting and pricing of the US dollar/ringgit pair, the market flows and the public's behaviour.
"Perhaps we (market players) should consider the greater interest, beyond our own individual profits or higher returns.
"We can see there's much general dissatisfaction (and) unhappiness over a weak ringgit and by inference, many of us prefer a stronger ringgit. Yet our actions do the opposite.
"We should change this," he said in his keynote address at the Financial Market Association of Malaysia Annual Dinner 2023 on Friday night.
Adnan, who stressed that the movements of the ringgit exchange rate in recent times have not been a fair reflection of Malaysia's economic fundamentals, called on market players to be prepared to play their role.
"All of us have to recognise that our individual actions could also be contributing to the short-term downward pressure on the ringgit.
"Demands by corporates and investors to invest abroad, exporters holding back conversion, importers purchasing foreign currency and hedging well ahead before its necessary. Individuals, businesses, opening foreign currency accounts and converting their ringgit savings for the higher foreign currency interest rates.
"Undoubtedly, collectively, these add further downward pressure to the ringgit," he said.
Adnan said market players should avoid contributing to the downward pressures on the ringgit, let alone jeopardise the orderly functioning of the market.
"Accordingly, market players should advise their clients to manage their foreign exchange (forex) exposures appropriately. This is to ensure that our financial market activities do not become an amplifier of risks to the economy," he said.
While Malaysia is neither in any crisis nor any financial or economic stress, the central bank remains vigilant, he said.
Adnan said there is a need to be prepared as the anticipated change in global monetary tightening stances, in particular in the United States, is not a done deal given the continued presence of inflation risks.
"BNM, of course, is monitoring market behaviour and market flows and will act accordingly. At its basic, where necessary, we will come to the market to ensure liquidity and stem any undue volatility.
"Our surveillance has expanded, now covering not just financial markets, but also tracking corporate flows; exports, imports and loan repayments, trends among the investing public including the growing availability of foreign currency offerings," he said.
Adnan noted that recent forex forecasts by analysts, reflecting that the Federal Reserve could be nearly at the end of its rate hiking cycle, also showed that some market participants expect the ringgit to strengthen, reaching the 4.55 to 4.61 level by year-end and further strengthening in 2024.
"We can all play a role in getting us there.
"Finally, as we step into the new year, I hope we continue to navigate the financial markets with greater awareness of our impact and recognise that our collective actions can shape a more resilient and equitable financial landscape," he said.
Adnan also highlighted that despite various challenges in 2023, Malaysia continues to see resiliency in the financial markets, with the forex market recording a strong daily turnover volume of US$15.4 billion per day.
"Ringgit volatility remains the lowest among regional peers. Indeed, two years into this current cycle of US dollar strength, our markets, financial institutions and financial sector, (and) the economy have all weathered this challenge rather well," he said.
He also emphasised that using the ringgit as a barometer of the country's economic development is a misleading indicator, looking at Malaysia's continued economic growth and fiscal position.
Adnan said that market indicators that BNM tracks – daily trading volumes in forex of US$15.4 billion and interbank money market of RM8.77 billion – continue to show strong growth in 2023.
"The outstanding size of our bond market is now above RM2 trillion with the government bond market at RM1.1 trillion, a testament to how our financial markets have been able to absorb and intermediate long-term financing for the government and corporate sector," he said. --BERNAMA