Move to repatriate foreign earnings by GLC, GLIC has paid off - BNM Governor

KUALA LUMPUR: The move to repatriate foreign earnings by the government-linked companies (GLC) and government-linked investment companies (GLIC) in response to Bank Negara Malaysia's (BNM) call to relieve pressure on the ringgit has paid off, said governor Datuk Abdul Rasheed Ghaffour today.

"We are not able to reveal the institutions and what volumes they brought back, but they have been able to bring back very consistently on a daily basis," he said.

Abdul Rasheed said BNM saw that the preventive efforts led to a positive outcome and an immediate impact, strengthening demand for the ringgit throughout February.

"The ringgit has appreciated by approximately 1.8 per cent against the US dollar," he said.

BNM said that as a result of the central bank's engagement, forex traders, who concurred that the ringgit was undervalued, agreed to maintain ringgit positions for an extended period.

During the presentation earlier following the release of BNM's flagship publications, Abdul Rasheed said greater policy rate increases in other countries relative to Malaysia were one of the main factors causing the ringgit depreciation against other currencies.

"Other countries have increased their interest rates more aggressively than Malaysia since March 15, 2022. Malaysia's magnitude of the overnight policy rate (OPR) increases stood at 125 basis points.

"For example, the United States has increased its policy rate by 525 basis points from 0.25 to 5.50 per cent since March 15, 2022. Meanwhile, the OPR has only increased by 125 basis points, from 1.75 to 3.00 per cent over the same period," he said.

Abdul Rasheed said the greater magnitude of US policy rate hikes compared to our OPR was associated with a 10.5 per cent depreciation of the ringgit against the US dollar as of March 15, 2024.

Commenting further, the governor said the decline in the value of the ringgit is temporary and due to external factors.

Since the beginning of 2024, he said the ringgit has depreciated from RM4.60 per US dollar to RM4.79 per US dollar on February 20. However, the local note has recovered to RM4.70 per US dollar as of March 15.

Looking ahead, Abdul Rasheed said financial markets expect the ringgit to appreciate further into 2024 and continue on an appreciating trend as the effect of global factors subsides.

"Some analysts have projected further into 2025 and assessed the ringgit to continue strengthening.

"In addition, the recovery in the growth of regional countries is also expected to increase inflows into the region, benefiting Malaysia and the ringgit.

"Furthermore, in the domestic market, the favourable economic outlook and the implementation of structural reforms are expected to provide support to the ringgit," he said.

Nevertheless, he said the central bank remains vigilant of factors that could raise the risk of a decline in the ringgit, such as China's slower growth momentum and moderation in global commodity prices.

-- BERNAMA