BNM assistant governor Adnan Zaylani Zahid said the central bank has a repatriation policy whereby Malaysian exporters are required to repatriate their foreign earnings back into the country within six months, but since 2021 they are not required to convert it back to ringgit.
“Our position on this is pretty much a business decision that exporters will have to make. As they have liabilities and obligations to meet in the local currency, they will convert whatever is necessary.
“Aside from that, they have other obligations in foreign currencies,” he said at BNM’s Q2 2023 gross domestic product (GDP) briefing today.
Based on BNM’s data, exporters tend to convert 60% to 70% of their foreign proceeds and this is a consistent trend. Adnan said that exporters’ conversion of export proceeds was about 69% in July.
“What we observed was earlier (this year), perhaps in the second quarter, some exporters reduced their conversion but it picked up again towards end of the first half (H1 2023),” he added.
With the recent strengthening of the ringgit, BNM said last week there has been an increase in the conversion of export proceeds into the local currency by exporters.
BNM’s forex intervention
Meanwhile, BNM governor Shaik Abdul Rasheed Ghaffour said the main objective of BNM’s presence in the foreign exchange (forex) market is to ensure an orderly market and that there is no excessive volatility.
“I won’t say it is an intervention,” he said today.
He noted that due to investors’ anticipation of aggressive monetary policy tightening in the US and other advanced economies during the first half, the ringgit experienced a 4.7% depreciation against the US dollar year-to-date.
However, since July 1, the ringgit has appreciated 1.1% against the greenback, “amidst overall market expectations that the monetary policy tightening campaign in the US is nearing its end,” he added.
Abdul Rasheed said the central bank remains committed to vigilant monitoring of global and financial market conditions, aiming to maintain an orderly market adjustment.
“Towards this end, BNM’s presence in the foreign exchange market is to stem currency movements that are deemed excessive,” he said.
Adnan said the forex market has “grown tremendously”, with trading volume of the US dollar and ringgit ranging between US$15 billion (RM69.6 billion) and US$17 billion (RM78.9 billion) on a daily basis.
He said BNM does intervene in the forex market when necessary.
“BNM only steps in when there is a reduction in liquidity. Sometimes this happens when there is a strong sentiment one way or the other,” he added.
Another way that BNM intervenes is in periods of high uncertainty or when there is a lot of volatility, he added.