Ringgit prices and its volatility have been affected by activities and prices in the offshore non-deliverable forward (NDF) market which is not necessarily reflective of the economic fundamentals and underlying trade and investment activities, said Bank Negara Malaysia (BNM).
In a statement, the central bank said it required onshore banks to adhere to the current rules to prevent facilitation of offshore ringgit NDF market in line with the well-established policy of the ringgit.
“This is to protect the interest of the real sectors and genuine investors in the Malaysian financial market from undue ringgit volatility,” it said.
BNM said the Malaysian financial market remained open with the adherence effectively in place.
Liquidity, it added, continued to be available supporting smooth and orderly functioning of the Malaysian financial market in intermediating the needs of market participants.
During the week of Nov 14-18, it said a total of RM39.7 billion and US$49.1 billion were transacted in the Malaysian bond and foreign exchange markets, compared to RM17.8 billion and US$31.6 billion transacted in the preceding week, respectively.
Non-resident participants, such as corporates, global asset and fund managers, as well as clearing and custodian banks continued to transact in the Malaysian financial markets.
“The transactions were intermediated by 58 Malaysian onshore banks, which include 19 foreign banks that are subsidiaries of regional and large global banks.
“A number of foreign banks have begun discussing with BNM on their financial market transaction needs to facilitate smooth transition during this period, without causing market disruption,” said BNM.
The central bank also said with reference to the BNM governor Muhammad Ibrahim’s speech at the Financial Markets Association annual dinner on Nov 18, the Financial Markets Committee (FMC) members welcomed the announced initiatives and strategies to further deepen the liquidity on the onshore market while providing more flexibility for market participants to manage foreign exchange risks with onshore banks.
It added the FMC was looking forward to carry through these initiatives and engage with the industry to support an efficient and effective implementation.