Stability is very important for a currency – NOT for speculation

Today (18th january 2017), I read an article about Bank Negara Malaysia’s (BNM) comments about the ringgit. I think it helps everyone to understand the measures taken by BNM. The measures were meant to ensure that ringgit is used for trade purposes. Before these measures, the ringgit transactions for non-trade purposes was by far higher than the transactions because of export-import trades. To explain in brief, if we have trade SURPLUS (Exports higher than Imports) , the international currency reserves level should naturally RISE and followed by strengthening of the ringgit. If we have trade DEFICITS (Exports lower than Imports), then the international currency reserves level should reduce and the ringgit should naturally depreciate as well. Important BNM’s statements as below:

BNM’s statement: “The exchange rate volatility declined with the average ringgit intraday movement narrowing to around 61 points from an average of 82 points in December last year.”  (Volatility is reducing which is best for businesses, right?)

Bank Negara pointed out that the difference between the buying and selling rates had also narrowed noticeably to 20 points in January, reducing the forex transaction cost. (Currency is a trade facilitator, nothing more.)

BNM shared: “The ringgit level could further stabilise with the continued rebalancing of the demand and supply of the ringgit and the adverse influences from the NDF market being further reduced.”

Of course, when there are expectations, then the currency would also move as well, just like when everyone is expecting some rate increase for US$, the demand would naturally increase and its value increasing. Yes, is is expected that there would be three rate rises for the U.S. this year by Federal Reserve. We will just have to wait and see how much it will affect the ringgit versus the current measures introduced by BNM. Full article in TheStar with BNM’s explanation here. Happy following and may ringgit continue to be stable.

written on 18 Jan 2017

Next suggested article:    BNM: Stabilising ringgit is priority and welcoming long-term investors

2 thoughts on “Stability is very important for a currency – NOT for speculation

  1. Superb posts bro and love reading your articles ….keep up the good jib as the articles are just so empowering and informative….simply super stuff :):):)cheers

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