KUALA LUMPUR, Aug 20 — Bank Negara Malaysia (BNM) is confident that the US Federal Reserve's first interest rate increase in nearly a decade will not overwhelm the ringgit that has already lost over a fifth in value versus the US dollar since last year.

According to the central bank’s governor, Tan Sri Dr Zeti Akhtar Aziz, the ringgit’s slide to US dollar is more likely caused by the uncertainty resulting from anticipated monetary policy change, rather than the move itself.

“Of course I think it’s more the anticipation and the uncertainty of the timing that’s causing this movement,” Zeti told reporters after a World Bank event in BNM’s Sasana Kijang.

Zeti said the turmoil was similar prior to the planned tapering of the US’s Quantitative Easing stimulus in March last year, which saw huge outflows of foreign fund from Malaysia, although the market stabilised once the actual rollback happened.

“Market wants certainty, and right now the action that will be taken by the major economies like the US is dependent on the development in their own economy.

“So we have just to be patient and have the degree of resilience to ride out this period of certainty,” she added.

She said once the US market settles, Malaysia will benefit from the positive development as the economic giant is a major market for its export.

Zeti also reiterated today that BNM will not be pegging the ringgit to any currency, saying that Malaysia’s solution to the volatility in the market has long been developing its financial market.

“When our currency appreciated, we appreciated much more than others. So now the depreciation, were depreciating more than others,” said the governor.

“So there’s no intention of moving to a less flexible regime like pegged exchange rate regime … The fact we can adjust allows the rest of our economy remain stable.”

The minutes of the Federal Open Market Committee’s meeting in July released today mentioned that economic conditions were “approaching” those that would warrant the US Federal Reserve rate increase, but did not mention any timeframe.

The ringgit opened slightly higher against the US dollar earlier today, trading at RM4.098 per dollar compared to RM4.104 at closing yesterday.