Malaysia’s central bank sees ‘enduring support’ for ringgit

The rally in Malaysia’s ringgit is likely to last given the nation’s favourable economic outlook and reforms, according to the nation’s central bank. 

“Malaysia’s positive economic prospects and structural reforms, complemented by initiatives to encourage flows, will continue to provide enduring support to the ringgit,” Bank Negara Malaysia said in an emailed response to questions from Bloomberg News on Wednesday (Sep 25).

The ringgit is the top performer across emerging markets this quarter. The currency rose to as high as 4.1080 per dollar on Wednesday, the strongest since June 2021.

The Malaysian currency has been buoyed by signs of a rebound in China, the nation’s largest trading partner, following Beijing’s stimulus package that was announced on Tuesday. 

The central bank’s deputy governor Adnan Zaylani Mohamad Zahid said on Wednesday the ringgit’s appreciation also followed “greater clarity on the interest rate path of developed countries, especially the US Federal Reserve.” 

“The narrowing of interest rate differentials with the US would be conducive to favour portfolio inflows, especially given Malaysia’s positive economic prospects,” he said in a speech at the IFN Asia Forum in Kuala Lumpur.  

This comes on top of the half-point rate cut from the Federal Reserve last week, which narrowed the rate differential between US and Malaysia, making ringgit assets more attractive for global funds. 

Bank Negara Malaysia kept rates unchanged at its September decision, with the deputy governor noting in a Bloomberg Television interview earlier this month that the benchmark will likely be held at current levels this year. BLOOMBERG