KUALA LUMPUR, Feb 29 — The ringgit is expected to continue to strengthen this year, trading at RM4.50 against the US dollar by year-end, driven by the country’s positive economic performance, said Finance Minister II Datuk Seri Amir Hamzah Azizan.
Coordination between the Finance Ministry and Bank Negara Malaysia (BNM), as well as joint efforts between government-linked investment companies (GLCs) and government-linked companies (GLICs), will help to increase inflows into the foreign exchange market to strengthen the value of the ringgit.
BNM is also always ready to intervene in the foreign exchange market to curb currency movements that are considered excessive.
“For example, BNM will sell US dollars from its reserves to curb the excessive weakness of the ringgit.
“The efforts made by the government are effective, and there is no need to use instruments like pegging the ringgit or shutting down the ringgit exchange as was done during the Asian Financial Crisis,” he said during the question-and-answer session in the Dewan Rakyat today.
Amir was responding to Bagan MP Lim Guan Eng’s supplementary question, who wanted to know the government’s projection on the local currency’s recovery and the steps taken by BNM to strengthen the ringgit’s value.
He added the ringgit’s movement is influenced by various factors, and the current depreciation is largely driven by the strengthening of the US dollar and the uncertainty of China’s economic growth, which has also affected other regional currencies.
As of February 28, the ringgit’s value has depreciated by 3.5 per cent against the US dollar, in tandem with regional currencies including the Japanese yen (-6.3 per cent), the Thai baht (-4.7 per cent), and the Korean won (-3.3 per cent).
According to analysts, the ringgit’s value is currently between 8.0-10 per cent lower than what it should be right now.
Amir said BNM will continue to monitor the financial market and take necessary measures, including intervention in the foreign exchange market to curb excessive currency movements.
The central bank also monitors the conversion of export proceeds into ringgit by exporting companies, in addition to continuing efforts to encourage the use of the local currency for export settlements to reduce dependence on the movement of the US dollar.
“The government also controls overseas investments by private companies to reduce pressure on the ringgit, including encouraging them to prioritise domestic investments and delaying new overseas investments.
“Foreign investments implemented also need to be managed prudently, like hedging foreign currency exposure and bringing back proceeds from overseas investments to reduce the high pressure on the ringgit,” he said.
— Bernama
