Bank Negara Malaysia dealing with short-term volatility of the ringgit

A slew of measures undertaken by Bank Negara Malaysia are expected to help enhance a continuous supply of foreign currency. To discourage the trading of non-deliverable forwards offshore, the central bank has announced several initiatives to liberalise and deregulate the onshore ringgit-hedging market. They include providing market participants the flexibility to hedge their US dollar and Chinese yuan exposures up to a limit of 6 million ringgit (Bt48 million) per client per bank, allowing resident and non-resident fund managers to manage foreign-exchange exposures of up to 25 per cent of their invested assets, and to broaden accessibility by foreign investors and corporations to the onshore forex market via the appointed overseas office framework. There are also measures to streamline equal treatment for residents with ringgit borrowings investing in foreign-currency assets in the offshore and onshore markets as well as to refine the retention of export proceeds with incentives such as paying a special deposit rate of 3.25 per cent on converting export proceeds into the ringgit account. This facility will be offered until December 31, 2017, subject to further review.

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