Malaysia's central bank has issued a plea to investors, government-owned enterprises, and private corporations to assist in strengthening the value of the country's declining ringgit, which has faced continuous pressure, falling to a 26-year low against the US dollar just a week ago.
The currency, ranked as the second worst-performing in Asia at the close of 2023, sparked concerns when it reached its lowest point since the late 1990s Asian financial crisis, trading at 4.7965 against the US dollar, as reported by Bloomberg data.
Bank Negara Malaysia (BNM) disclosed that it has intensified discussions with government-linked investment corporations, private enterprises, and investors to foster sustained inflows into the foreign exchange market.
"The ringgit is undervalued. Given Malaysia's positive economic fundamentals and prospects, the ringgit ought to be traded higher," stated BNM Governor Abdul Rasheed Ghaffour.
Although the ringgit exhibited a slight recovery throughout the week, starting at 4.7775 against the dollar in last Tuesday morning trade, according to a Bernama report, it remains proximate to its all-time low of 4.885 in January 1998 during the financial crisis.
Analysts attribute the ringgit's weakness primarily to anticipated policy adjustments by the US Federal Reserve, prompting dollar inflows, and the profound challenges faced by China's economy.
Struggling to regain stability as Malaysia emerges from the Covid-19 pandemic, the ringgit trails only behind the Japanese yen as Asia's weakest currency over the past couple of years.
As of last November, Malaysia's currency had depreciated by about 6 per cent against the US dollar, a more substantial decline compared to the 5.4 per cent dip recorded in 2022, according to BNM data.
Trading lower against a basket of major currencies last Tuesday, the ringgit eased against the yen, British pound, and euro, while also declining against most Southeast Asian counterparts, albeit making modest gains against the baht amidst Thailand's sluggish economic growth.
Prime Minister Anwar Ibrahim acknowledged concerns regarding the ringgit's performance, yet expressed confidence in the country's preparedness to manage currency fluctuations compared to the late 1990s crisis.
The Malaysian government anticipates economic growth between 4-5 per cent in 2024, aiming for acceleration following the weaker-than-expected 3.7 per cent pace in the preceding year.
While a weak ringgit is generally beneficial for Malaysia's exports, a vital component of the trade-dependent nation's GDP, it may also contribute to inflationary pressures as businesses transfer increased costs of imported raw materials to consumers.
