PETALING JAYA: A sustained strengthening of the ringgit will spur greater interest for foreign exchange (forex) conversion by corporates with excess foreign currency holdings, according to the Financial Markets Committee (FMC).
This would further support sentiment on the ringgit, said the FMC which convened at a meeting yesterday to discuss recent developments in the ringgit forex market.
“The meeting further discussed the impact of the ongoing coordinated efforts to encourage more consistent inflows by the government-linked companies and government-linked investment companies as well as greater engagements with Malaysian corporates and businesses,” it said.Since Feb 26, the ringgit was the only regional currency that strengthened against the US dollar and gained 0.6%.
Across the same period, the average daily forex volume was US$17.6bil compared with US$15.5bil in 2023.
“FMC members noted the higher forex conversion activities in the onshore forex market, driven by the significant flows arising from the coordinated efforts as well as opportunistic selling of the US dollar by certain exporters,” it added.
The meeting views that the ongoing coordinated efforts can be sustained given that the focus is on investment income and export revenue which are recurring in nature, it noted.
The meeting was particularly encouraged by Bank Negara’s enhanced efforts to further promote forex conversion activities by Malaysian corporates and businesses.
“The current level of ringgit is deemed undervalued, particularly as Malaysia’s economic fundamentals continue to be strong and the economic prospect is positive,” FMC chairman and Bank Negara deputy governor Adnan Zaylani said in a statement.
“Bank Negara is not considering capital controls or restrictions like those introduced during the Asian Financial Crisis taking into account the potential costs and impact to the economy,” he added.