Malaysia central bank: FMC members observe stable conditions in onshore FX market

Malaysia’s onshore foreign exchange market has remained stable in recent months, according to members of the Financial Market Committee (FMC). The FMC noted that coordinated interventions by Bank Negara Malaysia (BNM) and the government have helped mitigate excessive volatility, particularly following periods of global uncertainty earlier in the year. These efforts included encouraging income repatriation and conversion among government-linked investment companies (GLICs) and government-linked companies (GLCs), which contributed to restoring investor confidence.

Daily foreign exchange trading volumes have averaged USD17.6 billion, reflecting robust two-way flows and effective intermediation in the market. The ringgit has demonstrated resilience, appreciating by 14.4% in the third quarter of 2024 amid a clearer easing path from the U.S. Federal Reserve. On a year-to-date basis, the ringgit remains up by 3.3%, making it the only currency in the region to strengthen against the U.S. dollar amid heightened volatility.

The FMC also highlighted the continued expansion of Malaysia’s bond market, which surpassed RM2 trillion in outstanding size. This growth underscores the financial sector’s capacity to intermediate long-term financing and absorb capital inflows. The committee emphasized the importance of further developing the bond and sukuk markets, including efforts to secure MGII FTSE inclusion.

Looking ahead, the FMC remains attentive to evolving global dynamics, including potential shifts in international trade policy and geopolitical risks. However, the committee expressed resilience of financial markets and the effectiveness of ongoing initiatives to enhance liquidity and market depth.