Source – The Malaysian Insiders
Release Date: October 09, 2013
The government will continue to ensure an orderly condition for the ringgit foreign exchange market to enable adjustment in the real economy.6
Deputy Finance Minister Datuk Ahmad Maslan said for the long term interest, priority should be given to achieving an equilibrium between exchange rate flexibility and stability.
“Exchange rate flexibility under the managed float system enables the ringgit to play its role as shock absorber and price indicator,” he said in his speech at the Relaunch of Malaysian Association of Corporate Treasurers (MACT) ceremony in Kuala Lumpur today.
He said the value of the ringgit was determined by market forces and the government does not have any specific target level or range for the exchange rate.
“What is important is the formation of a buffer and structural improvements in the economy and financial markets since the Asian financial crisis 1997/98 had put regional economies, including Malaysia, in a situation in which they are more prepared to manage the risk in financial market volatility compared with a decade ago,” he said.
Ahmad said the domestic demand that remained strong also provided the buffer to external uncertainties.
In addition, the country’s economy is now more balanced than in 2000, with strong economic fundamentals and diversified sources of growth.
“Domestic demand particularly has become a key driver of growth and the services sector plays a more major role. The country’s unemployment level also remains low at 3%,” he said. The financial system is now stronger and more advanced than before, he said.
Ahmad said Malaysia’s banking system which remained resilient as well as its deep and diversified domestic bond market had also created a good intermediation of funds.
Besides that, the level of the country’s international reserves remained strong and external debt was low and under control at 28.2% of gross domestic product in the second quarter of 2013.
As at Aug. 30, 2013, the international reserves of Bank Negara Malaysia totalled US$134.8 billion (RM428.1 billion), sufficient to finance 9.3 months of retained imports and was 3.7 times the short-term external debt.
Recently, the value of the ringgit and other regional currencies recovered strongly, driven mainly by external developments including changes in market expectations relating to the reduction of quantitative easing by the United States.
During the one month ended yesterday, the value of the ringgit increased 2.6% against the US dollar.
“Based on latest currency movement, that is, US$1 equivalent to RM3.1985 when trading closed yesterday, it is clear that its position is in line with the country’s economic fundamentals at present,” said Ahmad. – Bernama, October 9, 2013.
