Malaysian Ringgit Exceeds Sharp Adjustment Phase, Says Central Bank Governor

KUALA LUMPUR, March 24 (Bernama) -- The Malaysian ringgit has exceeded the adjustment phase but Bank Negara (Malaysia's Central Bank) Governor Dr Zeti Akhtar Aziz warned that there was still continued volatility in the local unit against the US Dollar. "Ringgit volatility since September 2014 has exceeded levels in previous episodes of sharp adjustments," she said. The local currency has outperformed most regional currencies since the end of September 2015, she told a press conference in conjunction with the release of BNM's 2015 annual report here Wednesday. When asked if the ringgit would strengthen to the RM3.80 level this year, she said the central bank was not projecting any level for the exchange rate. "But, what we are projecting is for volatility. "Therefore, that is why we liberalise many exchange administration growth so that businesses and even households can better manage their foreign exchange exposure," said the 69 year-old governor who is retiring as the head of Bank Negara in April. The ringgit strengthened to close higher against the US dollar on Wednesday at 3.9910/9960 against 4.0050/0100 on Tuesday but not before touching a high of 3.9597 earlier in the day. Improved investor confidence, sparked by a recovery in crude oil prices to above US$40 per barrel, helped the local currency appreciate below the 4.0 level. A dealer said the local currency had bucked the performance of its regional peers, rallying at its monthly best since 1998. Zeti said the ringgit's current strength was mainly due to the inflow of foreign funds and the central bank would monitor the development closely. "What we would like to see is the underlying trend. "As long as our external conditions are favourable, economy continues to grow and financial systems are solid and sound, we can expect these fundamentals to support the underlying strength of our currency, " she said. On the economic outlook for Malaysia, she said it would expand between 4.0 and 4.5 per cent in 2016, driven by domestic demand. Zeti said all economic sectors, except for agriculture, are expected to expand, with the services and manufacturing sectors remaining the key drivers of overall growth. She said consumer spending would be affected by an environment of higher prices and greater uncertainty but would remain supported by continued income and employment growth. Zeti also assured that the country's financial stability this year would remain sound, while financial institutions would continue to maintain strong capitalisation with ample liquidity buffers and sustained profitability. "Banking system surplus liquidity remained high at US$44.31 billion (RM178.3 billion) as at January 2016. "The country's economy remains resilient with the ability to manage potential downside risks to growth," she added. --BERNAMA