Malaysia Central Bank Moves to Support Ringgit Amid Foreign Fund Outflows

Malaysia’s central bank has announced new measures to support the ringgit after the currency weakened more than 4% in June, driven largely by foreign investor caution and expectations of higher U.S. interest rates.

Bank Negara Malaysia (BNM) said its Financial Markets Committee (FMC) reviewed recent developments in the foreign exchange market and concluded that Malaysia’s economic fundamentals remain strong. The central bank emphasized that the domestic foreign exchange market continues to operate in an orderly manner despite recent volatility.

To strengthen the ringgit, BNM plans to intensify efforts aimed at attracting foreign investment inflows while encouraging government-linked companies, investment-linked firms, and corporations to repatriate earnings held overseas. These measures are intended to improve foreign currency liquidity and provide additional support for the Malaysian currency.

According to the FMC, the ringgit’s recent decline was mainly influenced by cautious positioning among foreign investors and growing expectations that the U.S. Federal Reserve could maintain higher interest rates for longer due to persistent inflation concerns. Global financial markets remain focused on the outlook for U.S. monetary policy, which has continued to impact emerging market currencies.

The committee noted that recent foreign investor outflows largely reflected portfolio rebalancing after the ringgit’s strong performance earlier this year rather than a deterioration in Malaysia’s economic outlook. Despite losing 4.5% during June, the ringgit remains down only about 2% for the year, making it one of the best-performing currencies in emerging Asia.

BNM also observed that non-resident investors are currently maintaining a largely neutral position in their investment portfolios. Looking ahead, the central bank expects both external market developments and domestic economic conditions to influence the ringgit’s performance.

However, policymakers remain confident that Malaysia’s resilient economy, healthy financial system, and solid economic profile will continue to provide long-term support for the ringgit, helping the currency navigate ongoing global market uncertainties and shifting investor sentiment.