KUALA LUMPUR (Aug 20): Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz denied today that Bank Negara issued a circular to foreign exchange (forex) dealers of both local and foreign institutions to stem the ringgit's depreciation.

Zeti said Bank Negara had merely "reinforced" existing regulations and informed dealers to adhere by those policies. Zeti declined to elaborate, only indicating that "there was nothing specific".

"There is no circular that has been issued. We just reinforced all the rules that we have put in place and that is what we had informed all those in the foreign exchange markets.

"Whatever rules we have in place, we had reminded the players in the market of these rules," Zeti said after the launch of the World Bank Global Findex Database 2014.

She was asked to clarify claims in news reports that Bank Negara issued the circular to forex dealers to disallow onshore banks from taking onshore fixing orders from offshore banks.

Today, a news report, quoting sources, claimed that Bank Negara issued the circular following the ringgit's depreciation past the 4.1000 level against the US dollar.

At 1.01pm, the ringgit was transacted at 4.1050 versus the US dollar after depreciating to the weakest level in one year at 4.1315 last Monday (Aug 17).

Besides Malaysian political uncertainties, the ringgit's weakness came amid lower crude oil prices, China's currency devaluation and the US interest rate hike prospects.

PM Najib, Zeti say no plans to peg ringgit

Meanwhile, Zeti reiterated that Bank Negara had no plans to peg the ringgit against the US dollar, which had been strengthening in anticipation that US interest rates will rise this year.

She said the ringgit was not the only currency which had weakened against the US dollar as other currencies had also depreciated against the greenback.

"There is no intention of moving to a less flexible regime — pegged exchange rate regime. The fact that we can adjust allows for the rest of the economy to be stable.

"If you can't adjust the currency, demand will adjust and prices will adjust," she said.

Meanwhile, Bernama quoted Prime Minister Datuk Seri Najib Tun Razak as saying the government would not implement capital control measures or peg the ringgit to the US dollar.

Najib said it was crucial to maintain the flexibility of ringgit exchange rates so that the local currency could respond accordingly to global economic and financial market adjustments.

"The flexibility of our exchange rate is thus important to absorb these global adjustments and volatility.

"Therefore, the government of Malaysia will not move to a pegged exchange rate regime nor will it impose capital controls," he said at a press conference in Putrajaya today.

In 1998, Malaysia pegged the ringgit at 3.80 against the US dollar before replacing the system with a managed-float scheme in July 2005.

Under the existing managed-float scheme, Bank Negara monitors the ringgit against a currency basket to ensure the ringgit's exchange rate remains near its fair value.