KUALA LUMPUR (Aug 15): Malaysia may have to contend with further currency volatility after Bank Negara Malaysia assured capital control measures were not on the cards to stem the ringgit's depreciation, digitaledge WEEKLY reported in its latest August 17-23 issue.

Yesterday, the ringgit weakened to a fresh level against the US dollar at 4.1270 after China devalued its currency and crude oil prices fell. Against the Singapore dollar, the ringgit depreciated to a new level at 2.9346.

China's move to devalue its currency led to expectation that other Asian central banks will do the same to ensure export competitiveness. The ringgit's strength correlates with crude oil prices as the commodity is a major component of the Malaysian economy and accounts for some 28% of government revenue.  

Following Bank Negara's assurance, digitaledge WEEKLY said : "This means the country has to brace for more ringgit volatility even as investors try to find their footing in the financial markets on the expectation of interest rate normalisation in the US."

The report by digitaledge WEEKLY followed a press conference by Bank Negara last Thursday in conjunction with the announcement of the country's second quarter economic numbers.

digitaledge WEEKLY quoted Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz as saying the central bank would continue with its existing flexible exchange rate system which allowed the country to adjust to external developments accordingly.

“We are not introducing capital controls. We’ve moved on from that because we have a more developed financial system (now), financial markets that are larger and able to absorb this kind of volatility. 

"We have also strengthened our financial intermediaries and they are better able to cope with it,” Zeti said.

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