THE ringgit is expected to experience bouts of heightened volatility due to the ongoing US-China trade war, which is showing no signs of resolution, and Brexit, said Bank Negara Malaysia governor Nor Shamsiah Mohd Yunus.
“Given the recent uncertainties in global trade and geopolitical developments, periods of heightened volatility in the ringgit should be expected,” she told The Star in an interview published today.
However, the condition is not unique to the ringgit as other regional currencies will also experience impact from the global events.
The ringgit has weakened by 0.6% against the greenback this year, in line with other regional currencies that have depreciated between 0.7% and 4.0%.
Shamsiah said Malaysia has a strong track record in managing similar situations and will be able to weather the uncertainty.
“At the end of the day, Malaysia does not rely on the exchange rate for its economic competitiveness.”
She added that Bank Negara will continue to be vigilant on risks and will ensure the domestic foreign exchange market remains orderly.
Market participants and businesses, said Shamsiah, should undertake proper exchange rate risk management.
In 2015, the economy weathered “the perfect storm” of oil price crash, the unravelling of the 1Malaysia Development Bhd (1MDB) scandal and large capital outflows, to continue its growth momentum.
“We has also experienced steep depreciation of the ringgit but our financial markets remained orderly and bank lending continued to increase.”
Shamsiah said it is important for the central bank to ensure financial intermediation is uninterrupted.
On the direction forward for the ringgit, she said the currency, which is flexible and market determination have acted as crucial shock absorbers in the past, has allowed the economy to continue its resilience amid a backdrop of external headwinds.
This, she said, was evident in 2014 and 2015 when the ringgit absorbed volatility to limit adverse impact on the economy.
THE MALAYSIAN INSIGHT
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