Encouraging reactions to Bank Negara's measures to support ringgit

KUALA LUMPUR: Market reactions have been encouraging following the recent measures announced by Bank Negara Malaysia (BNM) to encourage ringgit trading on the onshore foreign exchange market on Dec 2, 2016.
In December, the Financial Markets Committee (FMC) said, the average intraday movement of ringgit exchange rate declined to 68 points, being the difference between the daily highest and the lowest exchange rate quoted in the interbank market, compared with 228 points in November.
“The onshore foreign exchange (FX) market recorded daily average volume of US$8.3 billion across all FX transactions as markets adjusted to the new environment. Activities in the bond market were also healthy with daily average volume of RM4.5 billion.
Government benchmark securities rallied by 17–29 bps from Dec 1, 2016 levels. An auction of 20-year MGII held during the week was well received with bid-to-cover ratio of 3.75 times with strong interest from financial institutions and insurance companies,” the FMC said in a statement last Friday.
On the fund manager hedging framework, where registered domestic and foreign fund managers are able to actively manage up to 25% of their invested portfolio, it said a number of fund managers have approached BNM with initial four submitted registrations.
“FMC, together with BNM, is currently carrying out engagement sessions with parties to gather feedback, and arrangements are currently being made to further address the implementation issues.”
The FMC said it will continue to monitor financial market development and look forward toward continuous engagement to ensure development of the onshore market in creating a better and conducive financial environment for all.
The measures annouced on Dec 2 will not only require exporters to reduce their foreign currency holdings by 75%, but also ensure payments to suppliers are in ringgit, and that foreign currency investments onshore are kept in check.