KUALA LUMPUR (Oct 3): Bank Negara Malaysia (BNM) Governor Tan Sri Nor Shamsiah Mohd Yunus said on Monday (Oct 3) that it would be "remiss on my part" not to speak about the ringgit, which has depreciated more than 10% against a strengthening US dollar on agressive US interest hikes or monetary policy tightening to fight inflation.
"But on this, we need to be clear that the strength of the dollar is a global phenomenon — not just a Malaysian one. In fact, the US dollar is now at a two-decade high due to aggressive tightening of monetary policy by the Federal Reserve, which increased its policy rate by 300 bps (basis points) this year.
"Risk-off sentiments arising from geopolitical conflict and a moderating global (economic) growth outlook have further increased demand for dollar assets," Nor Shamsiah said in her speech at the Khazanah Megatrends Forum 2022 here.
At the time of writing, the ringgit weakened to 4.6495 against the US dollar.
The exchange rate so far on Monday was between 4.6375 and 4.6512, and over the last year, the ringgit was transacted at between 4.1392 and 4.6512 against the US dollar.
Nor Shamsiah said the currencies of other major economies have also depreciated against the US dollar.
"If we look at how the ringgit has fared against the currencies of our trading partners, it has appreciated against some and depreciated against others.
"In fact, the performance of the ringgit, if weighed against the currencies of Malaysia’s trading partners, [has] been relatively stable.
"This underlines the point that we are in an environment of US dollar strength," she said.
Nor Shamsiah said it is also important to emphasise that the ringgit’s performance against the US dollar alone is not a reflection of the state of the Malaysian economy.
The exchange rate is only one indicator among many indicators, according to her.
"Like I said at the start, it is important to consider the strength and positive performance of the Malaysian economy. Growth is robust, the labour market is healthy and the financial system is resilient and continues to perform its role effectively.
"Further, Malaysia has a strong external position with more foreign currency assets than foreign currency liabilities. Foreign currency borrowings only account for less than 3% of total federal government debt," she said.