Malaysia’s Finance Ministry said the depreciation of the ringgit will be cushioned by the country’s strong external position and robust fundamentals.
The ringgit market remains robust, with average daily onshore foreign exchange trading volume amounting to US$12.6 billion year-to-date, compared with US$11.3 billion in 2021, the ministry said in a statement on Saturday. Average volatility year-to-date stood at 3.9% versus 4.6% last year, it added.
“The flexibility of the ringgit will continue to benefit the Malaysian economy by facilitating appropriate external sector adjustments and cushioning the domestic economy from adverse global shocks,” the ministry said.
The Malaysian currency dropped to near a two-year low against the US dollar on Friday, tracking the general weakening of major and regional currencies amid bets on a Federal Reserve rate hike.
“Due to Malaysia’s open economy and market determined exchange rate, fluctuations in the ringgit are influenced by both global and domestic factors,” the finance ministry said.
The ringgit is positively correlated to the Chinese yuan as China remains Malaysia’s most important trading partners, it added. It has also been influenced by the Fed’s withdrawal of global liquidity, the ministry said.
The government and central bank will continue to monitor both financial and non-financial risks toward the economy, it said.
Bank Negara Malaysia will also “contribute to the smooth operation of the domestic foreign exchange market by always ensuring adequate liquidity, to ensure that businesses will be able to plan and execute both trade and investment transactions with greater certainty,” the ministry added.
