Local banks reminded to keep an eye on speculative Ringgit trading

Banks in Malaysia have been reminded that they play a key role in curbing speculative trading of the Ringgit internationally during this current period of “undue volatility.”

The recent move by the central bank to clamp down on Ringgit non-deliverable forward (NDF) was made in order to protect real sectors in the economy and genuine investors in the financial system here.

The reminder delivered by the Financial Markets Committee (FMC) today was aimed at the 58 onshore banks in the country.

"Ringgit prices and its volatility have been affected by activities and prices in the offshore NDF market, which is not necessarily reflective of economic fundamentals and underlying trade and investment activities," said FMC.

The FMC comprises participants and representatives from the central bank, financial institutions, corporations, financial services providers and other stakeholders.

It said liquidity continues to be available, supporting the smooth and orderly functioning of the Malaysian financial market in intermediating in the needs of market participants.

During the week of Nov 14 to 18, RM39.7 billion and US$49.1 billion were transacted in the Malaysian bond and FX markets respectively.

This compares to the RM17.8 billion and US$31.6 billion transacted in the preceding week.

Non-resident participants, such as corporations, global asset and fund managers, as well as clearing and custodian banks continue to transact in the Malaysian financial markets.

The transactions were intermediated by onshore banks, which include 19 foreign banks that are subsidiaries of regional and large global banks.

"A number of foreign banks have begun discussing with BNM on their financial market transaction needs to facilitate a smooth transition during this period, without causing market disruption," said FMC.

The committee also welcomed governor Datuk Muhammad Ibrahim's initiatives and strategies to further deepen liquidity on the onshore market, while providing more flexibility for market participants to manage foreign exchange risks with onshore banks.

"We look forward to carrying through these initiatives and engaging with the industry to support an efficient and effective implementation," FMC added.