9-6-2023 (KUALA LUMPUR) The ringgit is unlikely to reach the 5.0 level against the US dollar as Malaysia is not facing any form of crisis, according to Assistant Governor Adnan Mohamad Zahid of Bank Negara Malaysia (BNM). He stated that there are no concerning trends or speculative pressure that would lead to such a scenario, dismissing it as unrealistic.
During a panel discussion titled ‘Navigating Ringgit Exchange Rate Dynamics’ at the BNM Sasana Symposium 2023, Adnan emphasized that the country is currently not in a crisis. He pointed out that in previous crises, such as when the ringgit reached levels of 2.5, 3.0, and 4.0 against the US dollar, there were clear indications of a crisis. However, the current situation does not warrant excessive concern over the dollar-ringgit level.
Adnan acknowledged that there may be some residents interested in investing abroad, exporters holding back from conversion, or importers looking to buy forward at a faster rate. However, he assured that BNM is well-equipped to manage these fluctuations and maintain control over the country’s reserves.
While the ringgit-dollar exchange rate may experience fluctuations, Adnan expressed confidence that it will not approach the 5.0 level. He suggested that a turnaround could potentially lead to the ringgit hitting the 4.0 mark, but emphasized that it would require swift action.
Assessing the ringgit’s overall performance in the nominal effective exchange rate (NEER), Adnan noted that it remains relatively stable despite the banking and debt ceiling crises in the United States and the weakness in the Chinese economy. He highlighted the strong correlation between Malaysia and China, with China accounting for 13.6 percent of Malaysia’s total exports. Adnan also highlighted the resilience of the local financial market, attributed to institutional investors, pension funds, insurance companies, and asset management companies, which manage their portfolios against global bond indices. He emphasized the importance of implementing necessary reforms to ensure Malaysia’s bonds remain attractive to foreign investors.
Sylvia Wong, Head of Financial Markets at Standard Chartered Bank Malaysia, expressed that Malaysia is generally considered a favorable investment destination for foreign investors. Factors such as a current account surplus, significant trade volume (RM1.6 trillion in exports in 2022), flexible liquidity in capital markets, and ease of doing business contribute to its appeal. However, Wong mentioned that money managers tend to focus on short-term perspectives, assessing risk-on or risk-off conditions, as well as the differences between emerging markets and developed markets in terms of yields and returns.
Wong emphasized the private sector’s desire for stability and economic growth, enabling expansion in various industries while supporting the overall development of the real economy.
