REALLY? WITH RINGGIT ON THE MEND, FITCH UNIT SAYS NO MORE NEED TO RAISE RATES TO STEM OUTFLOW

Malaysian ringgit notes are seen among U.S. dollar bills in this photo illustration taken in Singapore in this August 24, 2015 file photo. REUTERS/Edgar Su/Files

KUALA LUMPUR – The recovery of the Malaysian ringgit removes the need for Bank Negara Malaysia (BNM) to raise its Overnight Policy Rates (OPR), BMI Research said today.

In its latest economic analysis for Malaysia, BMI said it maintains its view that BNM would hold to the current 3 per cent OPR for the rest of 2017 instead of raising or reducing the rates.

“The recovery of the MYR has removed the need for BNM to hike rates in a bid to stem capital outflows,” the Fitch Group unit said in a statement.

It said that the halt of the ringgit slide against the US dollar in June “marks the end of a bearish trend” and that the Malaysian currency is likely to be strengthened further.

“While a hike would likely lead to further currency strength, it could also undermine growth,” it added.

It said that reducing OPR rates however would benefit the US and not Malaysia.

The ringgit went as low as RM4.32 to the greenback during a prolonged depreciation period that lasted around two years.

It has since improved and is currently valued at RM4.29 to the US dollar.

– Malay Mail

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