Bank Negara denies propping up ringgit after US places Malaysia under watch

BNM said the inclusion on the US watch list has no consequences for the Malaysian economy. — Picture by Yusof Mat Isa
BNM said the inclusion on the US watch list has no consequences for the Malaysian economy. — Picture by Yusof Mat Isa

KUALA LUMPUR, May 29 — Bank Negara Malaysia (BNM) insisted today it does not interfere with the currency exchange and maintained that Malaysia adopts a floating exchange rate regime.

BNM was responding to the Trump administration’s move to include Malaysia in the “Monitoring List” of countries suspected of currency manipulation, including China.

BNM said in a statement issued immediately after the news broke out that Malaysia supports free and fair trade, and does not resort to unfair currency practices.

“The ringgit exchange rate is market-determined and is not relied upon for exports competitiveness.

“As acknowledged by the report, Bank Negara Malaysia’s intervention over the last few years has been in both directions of the foreign exchange market,” the statement read.

It added that any intervention is limited to keeping an orderly market and preventing excessive volatility of the exchange rate for macroeconomic stability.

“The fact that the ringgit has over the years faced multiple episodes of significant appreciation and depreciation points to the flexibility of the exchange rate,” the central bank stressed.

The Trump administration said yesterday that no major trading partner met its currency manipulation criteria but nine countries, including China, required close attention as Washington presses tariffs and negotiations to address trade deficits.

The Treasury Department, in a semi-annual report to Congress, said it reviewed the policies of an expanded set of 21 major US trading partners and found that nine required close attention due to currency practices: China, Germany, Ireland, Italy, Japan, South Korea, Malaysia, Singapore and Vietnam

As a small and highly open economy, BNM said Malaysia’s current account of the balance of payments is affected by both internal and external developments, including cyclical and structural factors.

About half of Malaysia’s trade surplus is driven by commodity exports, which is largely influenced by global demand and supply as opposed to the exchange rate, it added.

Malaysia’s inclusion in the list comes as President Donald Trump slapped tariffs on US$200 billion (RM838 billion) worth of Chinese imports and has begun imposing tariffs on another US$300 billion of Chinese goods.

However, BNM said the inclusion has no consequences for the Malaysian economy, and the economy remains resilient, underpinned by strong economic fundamentals, including the flexibility accorded by a floating exchange rate and strong external balance.