It's not just Malaysia, says Bank Negara after ringgit plunge

Bank Negara Malaysia (BNM) today said that the recent depreciation of the ringgit against the US dollar was not unique to Malaysia and that the currency should improve as global uncertainties subside. 

In a statement, the central bank said that ongoing developments in global financial markets had weighed down on market sentiment. 

"These include the US debt ceiling impasse and episodes of stress in the US and European banking sectors," it said.

"This has led to an increase in demand for safe-haven assets such as the US dollar and outflows from most emerging market economies as investors seek to protect their investments. Against this backdrop, the US dollar has strengthened against most currencies."

As a result, it said, the ringgit, alongside most other currencies, had faced heightened depreciation pressures. 

"It is important to consider the overall performance of the ringgit in relation to not only the US dollar, but also the currencies of our significant trading partners," it added.

"The movement of the ringgit against our major trade partners, as measured by the nominal effective exchange rate, has been relatively more muted.

"In the current environment, external developments are having a more dominant impact on ringgit performance. Given this, the ringgit’s performance against the US dollar, or any particular currency, is not a reflection of the state of the economy."

BNM said the economy was expected to continue expanding within the range of 4.0% to 5.0% this year, while domestic demand would continue to drive growth. 

"At the same time, Malaysia’s diversified export markets and product segments will continue to support the resiliency of the external sector," it said.

It said the ringgit movements would continue to be determined by the market, while BNM would continue to manage the risks arising from heightened financial market volatility.

"To this end, BNM’s market operations will ensure sufficient liquidity and orderly functioning of financial markets.

"The ringgit’s performance should improve as uncertainties from global market developments subside. This in turn will better reflect Malaysia’s sound economic fundamentals," it said.