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Malaysia central bank welcomes FX trading liberalisation

Malaysia central bank welcomes FX trading liberalisation

(16 August 2019 - Malaysia) Malaysia's central bank, Bank Negara (BNM), has announced new measures to provide more flexibility and liquidity for foreign investors trading the Malaysian Ringgit (MYR) and for resident businesses to manage hedging of foreign currency risks.

In the latest liberalisation of the central bank's Foreign Exchange Administration policy, residents can now hedge their foreign currency current account obligations up to their underlying tenure instead of being limited to one year.

Resident treasury centres are also given freedom to hedge on behalf of related entities via a licensed onshore bank. Non-resident treasury centres will be allowed to do the same either through a licensed onshore bank or appointed overseas office, after registering with the central bank.

BNM began relaxing currency conversion rules in Q3 2018, two years after it restricted offshore trade of the MYR and compelled exporters to convert 75 percent of their export proceeds into Ringgit. The rules were imposed in a move to limit the currency's depreciation and encourage domestic trade of the ringgit.

"The bank has also issued revised repo guidelines for industry consultation incorporating new flexibilities such as longer tenor limit and wider range of repo securities. The ringgit has depreciated by 1.3 percent against the dollar so far this year, placing it somewhere in the middle of the basket of regional currencies" Governor Nur Shamsiah stated.

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