Governor Abdul Rasheed Ghaffour said the recent spread in the ringgit’s performance indicates a recovery from the previous levels.

“In terms of whether we have a comfortable level for ringgit, we don’t target a certain particular level for the ringgit as it is market-driven,” he said at a press conference on the second-quarter 2024 (Q2 2024) gross domestic product (GDP) today.

In terms of the support for the ringgit moving forward, he said it is positive.

He noted that support for the ringgit comes from several factors, namely the US monetary policy, coordinated measures between the government and BNM, and Malaysia’s strong prospects.

On the ringgit’s performance recently, he said it has been appreciating of late, with financial market participants expecting imminent policy rate cuts from the US Federal Reserve, which has softened the US dollar and alleviated pressure on regional currencies, including the ringgit.

With these latest developments, the ringgit has appreciated by 3.1% against the US dollar year-to-date as at Aug 13, 2024.

On a nominal effective exchange rate (NEER) basis, the ringgit has also appreciated by 5.3 %.

He said the coordinated initiatives by the government and BNM with government-linked companies (GLCs) and government-linked investment companies (GLICs) alongside engagements with corporates, exporters, and investors continued to provide support to the ringgit.

“These efforts have resulted in more consistent flows into the foreign exchange market.

The daily average foreign exchange (FX) trading volume has risen to US$18 billion (RM79.77 billion) from Feb 26, 2024, to Aug 13, 2024 (Jan 2- Feb 23, 2024: US$15 billion or RM66.47 billion).

“The bid-ask spread is also narrower, indicating improved liquidity in the domestic FX market,” he said.

In April 2024, BNM rolled out a pilot fast-track pre-approval framework, known as the Qualified Resident Investor (QRI) programme, to reduce frictions for corporates to repatriate and convert their foreign currency funds from overseas investments and seeking to reinvest abroad when the time comes.

“This is to ensure two-way flows in the foreign exchange market,” Rasheed said, adding that the outcomes of the pilot programme were encouraging, whereby more than US$1 billion ((RM4.43 billion) of additional inflows were seen entering the domestic forex market.

“These additional flows have helped support the ringgit’s performance, contributing to the recovery of the ringgit that was observed in recent months,” he stressed.

As such, BNM announced that the pilot QRI programme will be extended from now until Dec 31, 2024, for eligible resident corporates who have outstanding direct investment abroad with assets of RM1 billion and above.

On Malaysia’s external performance, export is projected to expand further this year, driven by improving external demand, global tech upcycle, and higher tourist spending.

He said travel receipts increased further to RM22.4 billion in Q2 this year or an annual growth of 37%.

“In particular, tourist arrivals from China and India have been supported by the visa exemption measure that was introduced recently.

“In Q2, tourists from China improved to more than 690,000 arrivals from 2019 levels, while arrivals from India were close to 325,000, or about 165% of what we saw in 2019,” he said.

Moving forward, travel receipts are expected to increase further driven by higher tourist arrivals and spending per capita due to the visa exemption for China and India, as well as the expansion in flight network and capacity.

On the overnight policy rate (OPR), he said the Monetary Policy Committee (MPC) believes the system remains conducive to sustainable economic growth.

“The MPC will monitor evolving conditions and their impact on inflation and domestic growth into 2025, ensuring the monetary policy remains conducive,” he added.

Globally, Rasheed said that the monetary policy path is shifting towards central bank easing.

However, he noted that financial markets remain susceptible to economic developments, including growth prospects and any divergence between market participants’ expectations and the central bank’s actions.

“Other sources of volatility also remain, including the geopolitical tensions, which continue to weigh on investor sentiments,” Rasheed said.

Nevertheless, he said the domestic landscape remains positive, despite this shifting external outlook.

“A narrowing of interest rate differentials in the US would be conducive to inflows, especially given Malaysia’s positive economic prospects,” he added.