BNM governor says ‘no crisis’ despite ringgit hitting all-time low

 

“We are not in a crisis,” says BNM governor Abdul Rasheed Ghaffour. (Bernama pic)

PETALING JAYA: Bank Negara Malaysia (BNM) governor Abdul Rasheed Ghaffour has denied the economy is facing a crisis despite the ringgit hitting a new all-time low versus the US dollar as the country has strong fundamentals and a resilient banking sector.

While admitting the nation’s currency has hit levels seen when Malaysia was embroiled in the Asian Financial Crisis some 25 years ago, Rasheed did not appear to be too worried about it.

“What I want to highlight is that although we have touched the Asian Financial Crisis level, we are not in a crisis. It is different from what we experienced in the past,” said Rasheed when quizzed by reporters after the JC3 Journey to Zero conference today.

BNM is committed to taking all necessary measures to maintain a “smooth and controlled adjustment of the ringgit”, fostering a conducive environment for businesses to thrive, he added.

He also said the central bank possesses “an array of market measures” ready to boost the beleaguered ringgit, should the need arise. However, he did not disclose what these measures were.

At 5.51pm, the local currency stood at 4.7930 against the greenback. The ringgit hit an all-time low of RM4.7250 to the dollar on Jan 7, 1998, and this stood for almost a quarter century until Nov 4 last year when the local note fell to 4.7460 to the dollar.

Rasheed explained the currency market is navigating a robust US dollar environment, while recent geopolitical developments continue to impact the financial market.

“Almost all currencies in the world depreciated against the US dollar, especially those in emerging markets, including Malaysia,” he said.

While that may be true, the ringgit seems to be getting the worst of it as it is the worst-performing currency in Asia versus the greenback this year, after the Japanese yen.

The latest weakening of the ringgit comes as the US dollar strengthened on safe haven demand amid concerns over the ongoing Israel-Hamas conflict.

The situation has been worsened by Malaysia posting seven straight months to September of decline in exports, partly due to a slowdown in China, its largest trading partner.

The ringgit’s performance against the US dollar over the past 10 years, shown in this chart from the currency website Xe.com

An optimistic outlook

According to the statistics department, Malaysia has forecasted a 3.3% growth in the gross domestic product for the third quarter, from 2.9% previously.

“We have a strong banking system supported by a high level of capitalisation and healthy assets, and they are ready to fund the economy to support economic growth,” Rasheed said.

“Our capital sector is also very strong with a capital account surplus,” he added.

Earlier in his speech, the governor said the current ringgit fluctuations seem to be primarily driven by global developments, despite the nation’s robust economic growth, stable disinflation, current account surplus, and resilient banking sector.

“It certainly does not reflect our economic fundamentals,” he said, adding Malaysia’s economy today is resilient, notably in terms of economic fundamentals, the robustness of the financial sector, and the debt of the financial markets. - FMT