IN SHOCK SLUMP, RINGGIT PLUNGES TO 4.37: GET USED TO THE VOLATILITY, SAYS BANK NEGARA IN DISMISSING PEG RUMOURS

KUALA LUMPUR – The ringgit fell to a low of 4.3700 on Friday, the weakest since Jan 22, 2016 in volatile trade but Bank Negara Malaysia stated that the country will not peg the currency.

Governor Datuk Muhammad Ibrahim said it would not peg the ringgit despite the recent volatility which the currency has been facing due to external environment.

“(The) ringgit will continue to face volatility mainly due to uncertainties in the external environment. The value of the ringgit should not be determined by speculative position,” he said.

At a press conference on the third quarter GDP data, he was asked about the ringgit curbs. “Normally, we don’t’ actually reveal the specifics. We normally deal with individual banks but if there is any policy changes, we will announce it.”

On the ringgit, he said traders should not take the spot rate from the non-deliverable forward rate.

At 1.20pm, the bid rate for the regional onshore rate was 4.2700 and ask was 4.2800. The non-deliverable forwards (NDF) bid rate was at 4.3485 and ask was 4.3500.

The ringgit was quoted at 4.3492 to the greenback from 4.2802 the previous day and was at 5.4649 against the pound sterling from 5.3011 on Thursday.

(A non-deliverable forward (NDF) is a cash-settled, short-term forward contract in a thinly traded or nonconvertible foreign currency against a freely traded currency, where the profit or loss at the settlement date is calculated by taking the difference between the agreed upon exchange rate and the spot rate at the time of settlement, for an agreed upon notional amount of funds. The gain or loss is then settled in the freely traded currency.)

The ringgit was pegged at 3.80 to the US dollar in 1998 during the Asian Financial crisis and lifted in 2005.

Earlier on Friday, the ringgit depreciated against most major and regional currencies ,tracking the weaker regional currencies including Indonesia’s rupiah.

Muhammad said the volatility was a reflection of the shift in investor sentiments and the rebalancing activity of portfolio investors throughout the quarter, driven mainly by external events.

“While all regional currencies were affected by the continued uncertainty over the timing of US interest rate normalisation, the ringgit and the currencies of other commodity-exporting countries were faced with additional adjustments due to the highly volatile global crude oil prices during the quarter,” he said.

Earlier on Friday, Indonesia’s rupiah plunged the most in five years, prompting the nation’s central bank to say it stepped in to stabilize the market, Bloomberg reported.

The rupiah sank 2.7 percent to 13,495 per dollar as of 9:47 a.m. in Jakarta, set for the biggest decline since September 2011, according to prices from local banks compiled by Bloomberg. It dropped as much as 3 percent to reach a five-month low of 13,545.

Meanwhile, Asian shares stumbled on Friday and emerging market currencies skidded as investors feared higher interest rates under incoming President Donald Trump will spark capital outflows from the region.

Reuters reported MSCI’s broadest index of Asia-Pacific shares outside Japan  fell 1.4 percent as US bond yields continued to soar on views that Trump’s spending plans will push up inflation, possibly triggering more aggressive rate hikes by the Federal Reserve.

Emerging markets bore the brunt of selling, with Indonesian shares slumping 3 percent while the rupiah currency  fell more than 2.5 percent to 4-1/2-month lows.

The Mexico peso, sank to near its record low hit after Trump’s surprise sweep to power.

ANN

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