Ringgit seen strengthening, to trade at 4.50 to dollar by year-end

KUALA LUMPUR: The ringgit is expected to continue to strengthen this year, trading at RM4.50 against the US dollar by year-end, driven by the country's positive economic performance, said Finance Minister II, Datuk Seri Amir Hamzah Azizan.

He said coordination between the Ministry of Finance and Bank Negara Malaysia (BNM), as well as joint efforts between government-linked investment companies and government-linked companies will help to increase inflows into the foreign exchange market to strengthen the value of the ringgit.

He said BNM is also always ready to intervene in the foreign exchange market to curb currency movements that are considered excessive.

“For example, BNM will sell US dollars from its reserves to curb the excessive weakness of the ringgit.

“The efforts made by the government are effective and there is no need to use instruments such as pegging the ringgit or shutting down the ringgit exchange as was done during the Asian Financial Crisis,“ Amir Hamzah said during the question-and-answer session in the Dewan Rakyat today.

He said this in reply to a supplementary question from Lim Guan Eng (PH-Bagan) who wanted to know the government's projection on the local currency’s recovery and the steps taken by BNM to strengthen the value of the ringgit.

Amir Hamzah said the ringgit’s movement is influenced by various factors, and the current depreciation is largely driven by the strengthening of the US dollar and the uncertainty of China's economic growth, which has also affected other regional currencies.

As of Feb 28, 2024, the value of the ringgit has depreciated by 3.5% against the US dollar, in tandem with regional currencies such as the Japanese yen (-6.3%), the Thai baht (-4.7%) and the Korean won (-3.3%).

Amir Hamzah said BNM will continue to monitor the financial market and take necessary measures, including intervention in the foreign exchange market to curb excessive currency movements.

The central bank also monitors the conversion of export proceeds into ringgit by exporting companies, in addition to continuing efforts to encourage the use of the local currency for export settlements to reduce dependence on the movement of the US dollar.

“The government also controls overseas investments by private companies to reduce pressure on the ringgit, including encouraging them to prioritise domestic investments as well as delaying new overseas investments.

“Foreign investments implemented also need to be managed prudently, such as hedging foreign currency exposure and bringing back proceeds from overseas investments to reduce the high pressure on the ringgit,“ he said. – Bernama