THE ringgit’s current weak performance is attributed to external developments in global financial markets, including the US debt ceiling impasse and episodes of stress in the US and European banking sectors, Bank Negara Malaysia (BNM) said today.

“In the current environment, external developments are having a more dominant impact on ringgit performance. 

“Given this, the ringgit’s performance against the US dollar, or any particular currency, is not a reflection of the state of the economy,” it said in a statement late this evening.

BNM added that the ongoing external developments had led to an increase in demand for safe-haven assets such as the US dollar and outflows from most emerging market economies as investors seek to protect their investments. 

“Against this backdrop, the US dollar has strengthened against most currencies.

“Consequently, the ringgit, like most currencies, has faced heightened depreciation pressures,” it said.

BNM also said the recent depreciation of the ringgit was not limited to Malaysia alone. 

“It is important to consider the overall performance of the ringgit in relation to not only the US dollar but also the currencies of our significant trading partners. 

“The movement of the ringgit against our major trade partners, as measured by the nominal effective exchange rate, has been relatively more muted,” it said.

The central bank also said the movements in the ringgit would continue to be market-determined and that it would continue to manage the risks arising from heightened financial market volatility. 

“To this end, BNM’s market operations will ensure sufficient liquidity and orderly functioning of financial markets. 

“The ringgit’s performance should improve as uncertainties from global market developments subside. This in turn will better reflect Malaysia’s sound economic fundamentals.”

BNM further added Malaysia’s economy was expected to continue expanding within the range of 4.0-5.0% this year, backed by domestic demand, continued recovery in the labour market and the realisation of approved multi-year investment and capital projects.

The ringgit broke the 4.60 level against the greenback recently, touching a low of 4.6265 yesterday. At the time of writing, the ringgit was rebounding slightly to 4.6003. 

In the year to date, the local currency has weakened 4.8% against the US dollar. – May 26, 2023.