KUALA LUMPUR – The ringgit will be less volatile this year compared to last year as concerns over the current account (CA) levels lessen.
Moody’s Investors Service vice president/snr credit officer Christian de Guzman said in a media roundtable that the improving external outlook will help Malaysias exports and bolster the CA.
He noted that the volatility impacting the ringgit in recent quarters was due to the capital outflows overwhelming the CA.
De Guzman said that the ringgit’s volatility was also due to the high foreign holdings of government bonds.
“Much of the outflow has come from the government bond market,” he said.
In addition, Moody’s sees ringgit as fairly valued at current levels.
It said Bank Negara’s exchange controls, including non-deliverable forward (NDF) restrictions, have helped stabilised the exchange rate.
Moody’s said the country’s reserve adequacy was still low, but risks mitigated by structure of external debt, including currency composition.
The rating agency noted that the Government had demonstrated its commitment to fiscal consolidation despite difficult political backdrop.
It added that the absent of significant fiscal reforms in the 2017 Budget suggested an early elections.