BANK Negara Malaysia will not impose capital controls or restrictions to strengthen the ringgit, said the Financial Markets Committee (FMC) in a statement today.

The FMC said that measures such as those introduced during the Asian Financial Crisis in 1997 would not be undertaken now after taking into account the potential costs and impact to the economy.

The committee convened today to discuss recent developments in the ringgit foreign exchange market.

It said that since its last meeting on March 1, the movements of ringgit and regional currencies continued to be driven by global factors, particularly uncertainties surrounding the timing and extent of interest rate adjustments by major central banks. 

This was further evidenced by the stronger-than-expected US labour market data last Friday, indicating a more resilient US economy, and thus increasing the risk of the US Federal Reserve (Fed) maintaining interest rates “higher for longer”. 

Nevertheless, the FMC said the meeting today noted market expectations remain for the Fed to lower interest rates in 2H2024.

“FMC members noted that this morning, the ringgit traded in an orderly manner. It opened at 4.7475, the same level as Friday’s close and moved in tandem with other regional currencies.

“The meeting further discussed the impact of the ongoing coordinated efforts to encourage more consistent inflows by the government-linked companies (GLCs) and government-linked investment companies (GLICs), as well as greater engagements with Malaysian corporates and businesses.

“Since February 26, the ringgit was the only regional currency that strengthened against the US dollar (USD), gaining 0.6%,” said the FMC.

The FMC also added that the ongoing coordinated efforts can be sustained given that the focus was on investment income and export revenue which are recurring in nature. 

“In addition, a more sustained ringgit strengthening could spur greater interest for foreign exchange conversion by corporates with excess foreign currency holdings, further supporting sentiment on the ringgit. 

“The meeting was particularly encouraged by Bank Negara’s enhanced efforts to further promote foreign exchange conversion activities by Malaysian corporates and businesses.”

FMC chairman and Bank Negara deputy governor Adnan Zaylani, meanwhile, said the current level of the ringgit was deemed undervalued, particularly as Malaysia’s economic fundamentals continue to be strong and the economic prospect is positive. 

In response to lingering concerns among market participants, he also reaffirmed that “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.”

The FMC is a committee established by Bank Negara in May 2016 and comprises representatives from the central bank, financial institutions, corporations, financial service providers and other institutions which have prominent roles or participation in the financial markets. – April 8, 2024.