KUALA LUMPUR, Aug 12 — The ringgit has remained relatively stable against Malaysia’s major trading partners’ currencies, despite facing a stronger US dollar environment, said Bank Negara Malaysia (BNM) governor Tan Sri Nor Shamsiah Mohd Yunus.
She noted that for the second quarter (Q2) of 2022, the ringgit nominal effective exchange rate (NEER) stood at a marginal depreciation of 0.1 per cent.
“We cannot be much stronger than our major trade partners because it will affect our competitiveness as well, as all other currencies are weaker than the US dollar.
“We have to move away from our fixation of a bilateral exchange rate and look at it from a bigger perspective and one way is from the NEER,” Nor Shamsiah said during a joint press conference by BNM and the Department of Statistics Malaysia on Malaysia’s second-quarter (Q2) 2022 gross domestic product (GDP) performance here, today.
She added the US dollar strengthened as global financial market conditions continued to tighten following policy rate increases by major central banks, among others. The US Federal Reserve had raised the federal funds rate by 200 basis points (bps) thus far.
Nor Shamsiah also said the 10-year Malaysia Bond Market (MGS) yield rose by 36.5 bps in tandem with the upward movement in global and regional bond yields. Since July 1, however, MGS yields have trended lower.
“In this challenging environment, domestic financial markets will continue to be subject to episodes of heightened volatility.
“However, spillovers to domestic financial intermediation are expected to remain broadly contained, supported by Malaysia’s healthy external position and strong banking system,” she said.
The ringgit depreciated by 4.6 per cent against the US dollar in Q2 2022 and 6.3 per cent year-to-date (YTD) until Aug 10, 2022, broadly in line with the movement of regional currencies (Q2 2022: -4.7 per cent; YTD: -5.8 per cent).
Meanwhile, on the labour market outlook in Malaysia, the governor expected the condition to improve given the unemployment rate, which stood at 3.8 per cent in June 2022, was the lowest since the Covid-19 pandemic started.
“Our level of labour participation rate has exceeded the pre-pandemic levels and job creation has continued to increase.
“As the economic activity continues, we could expect the labour market conditions to gradually improve,” she said.
Nor Shamsiah further said the improvement in the labour market conditions in Q2 2022 was supported by robust employment growth. Jobless claims fell significantly, and the rehiring of retrenched workers remained relatively strong.
Besides, high-frequency data from the Social Security Organisation indicated a continued decline in layoffs and relatively strong hiring activity in Q2.
“On a year-on-year basis, private sector nominal wages improved in line with economic activity, recording a higher growth of 7.8 per cent in Q2.
“This was partly supported by the minimum wage hike, and driven by expansion in both the services and manufacturing sector wages,” she added.
— Bernama
