KUALA LUMPUR: Bank Negara Malaysia’s (BNM) foreign exchange (forex) reserves remain resilient, rising by US$800 mil to reach US$102.5 bil last month and putting a stop to its previous two months of decline, Public Investment Bank said.
It described the reserve position as “sufficiently strong” to support the country’s resilience against external factors and maintain macroeconomic and financial system stability, especially during volatile capital and currency market conditions.
The forex reserve position, sufficient to finance 7.9 months of retained imports and 1.1 times of short-term external debt, was comfortably above its position during the 2009 global credit crises and 1997/1998 Asian financial crisis, it said in a research note.
However, Public Investment Bank cautioned that this could ease in the upcoming months, driven by rising risk premium due to the Covid-19 pandemic. It added that the situation was not unique to Malaysia but applied across the Asean region.
The bank said the expected opening of Asean ports could push trade to restart and recover, a favourable prospect for the country’s trade surplus. This, along with a potential recovery in investor sentiment and the possibility of a Covid-19 “exit strategy” by the government soon, bode well for the country’s forex reserves, it said.
Public Investment Bank noted that forex reserves in ringgit terms also jumped by RM3.6 bil to RM443.7 bil in April, its best since November 2013.
The rise in April’s forex reserves, it said, was supported by an encouraging trade surplus which had remained steady so far.
“This was offset, however, by sustained foreign selling in the equity market though the selling intensity has slowed down noticeably,” it added.
On the ringgit’s performance, the bank said the local currency was traded at an average of RM4.3022 per US dollar in April, a 0.4% rise on a month-on-month basis – a positive trend consistent with the regional trend.
However, it said a sharper increase was seen for the Indonesian rupiah (+8.7%), the Singapore dollar (+1%), Thai baht (+0.78%) and Philippines peso (+0.54%).
It also cautioned that Asean currencies might experience intermittent periods of volatility due to pandemic, which remained a problem for the region. – May 20, 2020, Bernama
