Malaysiakini NEWS

Malaysia’s FX reserves surprisingly rise in late August

Trinna Leong and Emily Chow, Reuters
Published:  |  Modified:

Malaysia's international reserves, which have slid this year as the central bank has supported the country's embattled currency, increased in the last two weeks of August, surprising economists.

Currency reserves increased to US$94.7 billion as of Aug 28, Bank Negara Malaysia (BNM) said on Friday, from US$94.5 billion on Aug 14 - the lowest level since 2009.

Bank Negara said in a statement that reserves are sufficient to finance 7.4 months of retained imports, and are 1.0 times the short-term external debt.

Some economists and analysts have been worried about the pace at which Malaysian reserves - US$132 billion at the end of August 2014 - have fallen this year.

There was a slight increase in mid-June, but a sharp drop in July and August, as the ringgit plummeted.

"Today's number will probably help in alleviating some concerns, but we still have to wait and see," said Rahul Bajoria, economist at Barclays in Singapore.

"There are risks around the (mid-September) Federal Reserve policy meeting, which may see a more volatile period ahead," he said. "But broadly speaking, we are relatively comfortable with Malaysia's external position."

Suhaimi Ilias, economist at Maybank, said he was surprised by the increase, which "suggests there is a bit of stabilisation" after sustained pressure in July and the first half of August.

He suggested that funds could have been repatriated by government-linked companies and state-linked investments to offset outflows from foreign investment portfolios.

Currency traders suggested the increase might reflect that Bank Negara did not need to spend as much as before to support the ringgit as liquidity was thin.

The ringgit has seen losses of around 18 percent this year, making it emerging Asia's worst performing currency. This week, it strengthened to a one-week high of 4.1380 after reaching 4.2950 per dollar on Aug 26, its weakest since July 1998.

Multiple problems

On 0900 GMT today, the ringgit was about 4.2560 to the dollar, weaker than at the open though some losses were pared after Malaysia announced stronger-than-expected July exports.

Malaysia, a gas exporter, has seen a deteriorating trade balance from soft commodity prices, which contributed to the ringgit's decline.

It also faces a political crisis, with Prime Minister Najib Abdul Razak's leadership in question after alleged graft, which he denies.

Tens of thousands of Malaysians rallied in Kuala Lumpur last weekend, calling for his resignation.

Both Najib and Malaysia's central bank governor have pledged not to impose capital controls.

Najib said on Thursday that Malaysia's economy was in a stronger position now than during the 1997-98 Asian financial crisis.

During that crisis, Malaysia pegged the ringgit at 3.8 to the dollar, and retained that until 2005.

- Reuters

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