Bank Negara Malaysia will not peg the ringgit despite the recent volatility the currency has been facing due to external environment, governor Muhammad Ibrahim announced today.

“The ringgit should not be determined by speculative positioning. The ringgit level must be supported and dictated by the underlying fundamentals as such transactions are contracted by the banks on a daily basis.

“That’s how the prices of the ringgit should be determined,” he said after announcing Malaysia’s economy grew 4.3 percent in the third quarter of this year.

“Please don’t price the ringgit out of sync with what the fundamentals are. That is very important.

“This might entail certain guides that banks should not do certain things temporarily, not permanently, just to calm the market.

“I think that is a very important part. Because we did not want the market to be dictated by matters that have nothing to do with Malaysia’s economic fundamentals,” the governor said when asked on the sharp drop in the ringgit earlier today.

According to wire reports, the ringgit’s one-month non-deliverable forward (NDF) or offshore rates fell to 4.5280 versus the US dollar, while spot rates, also known as onshore rates, stood at 4.2670.

“(The) ringgit will continue to face volatility mainly due to uncertainties in the external environment. The value of the ringgit should not be determined by speculative positioning,” he said.

The ringgit depreciated against most major and regional currencies during the third quarter, he said at a press conference after announcing a 4.3 percent Gross Domestic Product growth for the third quarter of this year.

He said this was a reflection of the shift in investor sentiments and the rebalancing activity of portfolio investors throughout the quarter, driven mainly by external events.

“While all regional currencies were affected by the continued uncertainty over the timing of US interest rate normalisation, the ringgit and the currencies of other commodity-exporting countries were faced with additional adjustments due to the highly volatile global crude oil prices during the quarter,” he said.

Overall, the ringgit depreciated by three per cent against the US dollar during the quarter. The ringgit also depreciated against the euro (-3.9 percent), the Japanese yen (-4.2 percent) and the Australian dollar (-5.5 percent), but appreciated against the pound sterling (0.2 percent).

The ringgit also depreciated against all regional currencies except the Philippine peso, by between 1.8 percent and 7.3 percent.

- Bernama