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Business Times
9 hours ago
- Business
- Business Times
Malaysia FX reserves at three-year high to aid ringgit stability
[KUALA LUMPUR] Malaysia's increasing currency reserves are bolstering its defences against market volatility. The country's net foreign exchange (FX) reserves rose to US$94.7 billion at the end of April, according to the latest central bank data, the most since June 2022. Strong foreign inflows into local bonds and a weaker greenback, which enabled Bank Negara Malaysia (BNM) to unwind its net short forward FX position, both helped. These factors have strengthened the nation's bulwark against external shocks. 'The narrowing net shorts in FX forward book, combined with higher headline reserves, means that net reserves are rising at a faster pace,' said Winson Phoon, head of fixed-income research at Maybank Securities, adding that Malaysia's improving external resilience 'helps support ringgit stability'. The extra buffer may be coming at a fortuitous time. US President Donald Trump's tariffs, Sino-American tensions and geopolitical uncertainty have boosted currency volatility, and a weakening of the US dollar has changed the FX dynamic for emerging markets. As a trade-dependent economy, Malaysia and its currency are particularly vulnerable to trade tensions between its two largest export destinations – US and China. The recent boost in foreign reserves comes partially from the US$5 billion foreign inflow into the nation's conventional government securities in this quarter so far. That's on track to be the largest quarterly inflow on record in data going back to 2005. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Global funds have poured in amid optimism over the outlook of the ringgit and on rate-cut wagers, as BNM is the last rate-cut holdout in South-east Asia. The situation is different from December. Back then, BNM's net short forward FX book had widened to US$29.2 billion – just 0.2 per cent shy of an all-time low – as the central bank utilised currency forwards to support the ringgit. Global funds pulled out of Malaysian bonds for a fourth straight month. And the ringgit was the second-worst performer in emerging Asia in the final quarter of 2024, trailing only the won. BNM pared back its net short forward book position to US$24 billion in April, the narrowest since February 2024. The unwinding, which involves selling the local currency and buying the dollar, has not impacted the spot ringgit's performance so far. In fact, the ringgit is South-east Asia's top performer this quarter, after the Singapore dollar. 'A gradual pare-down of net short forward positions shouldn't create major headwinds for ringgit strength,' Maybank's Phoon added. BLOOMBERG
Malay Mail
24-04-2025
- Business
- Malay Mail
BNM holds firm — but market says a rate cut is coming
Investors are betting on a rate cut by Bank Negara Malaysia due to weak economic growth and rising global trade tensions. Malaysia's Q1 GDP growth fell short of expectations, prompting analysts to predict a potential 25-basis point interest rate cut by the end of 2025. The rising demand for Malaysian government bonds signals growing confidence in a rate cut, which could boost borrowing and foreign investments. KUALA LUMPUR, April 24 — Malaysia's bond market is rallying on rising expectations that Bank Negara Malaysia will ease interest rates amid trade tensions and a faltering growth outlook. According to a Bloomberg report, ringgit swaps are pricing in 30 basis points of rate cuts over the next six months, doubling from earlier forecasts. A recent three-year bond sale drew the strongest investor interest in over half a year, signalling a bullish bet on lower rates. Analysts say such a move would ease borrowing costs and support capital markets during a period of global uncertainty. 'Ringgit rates market has increased dovish bets for BNM,' said Maybank Securities' head of fixed-income research Winson Phoon, who explained that the country's weaker GDP and global trade risks made a rate cut increasingly likely. Malaysia's economic growth missed expectations in the first quarter, with GDP rising 4.4 per cent year-on-year. Simultaneously, Malaysia's inflation cooled to 1.4 per cent in March, giving BNM more room to cut rates without sparking price concerns. Malaysia's benchmark interest rate has been at 3.0 per cent since May 2023. Major banks including Goldman Sachs and CIMB now forecast a 25-basis point cut by year-end. Despite BNM's holdout stance, market sentiment suggests investors are positioning for a dovish pivot. However, compared to the surge in foreign flows to Thai bonds, Malaysia's modest bond inflows signal a wait-and-see mood.
Free Malaysia Today
24-04-2025
- Business
- Free Malaysia Today
Investors expect Malaysia to cut interest rates
Ringgit swaps are pricing 30 basis points of easing by Bank Negara Malaysia over the next six months, double the expectations from just a month ago. KUALA LUMPUR : Investors increasingly expect Malaysia, Southeast Asia's last holdout against interest rate cuts, to give in to mounting economic pressure from the global trade war. Ringgit swaps are pricing 30 basis points of easing by Bank Negara Malaysia (BNM) over the next six months, double the expectations from just a month ago. A recent auction of a three-year government bond – the most sensitive benchmark to rate expectations – received a bid-to-cover of 3.18 times, the highest since August for short-to-mid dated notes. A cut could spur borrowing and investment, while signalling to investors that BNM is concerned about the growth outlook amid the global tariff uncertainty. 'Ringgit rates market has increased dovish bets for BNM,' said Winson Phoon, head of fixed-income research at Maybank Securities Pte Ltd. Amid weaker-than-expected first quarter gross domestic product and rising global trade tensions, a rate cut would drive the three-year benchmark to outperform other parts of the curve, he added. Maybank sees a potential 25-basis point rate cut by the end of 2025. Goldman Sachs Group Inc and CIMB Bank are also anticipating a 25-basis point easing later this year. Malaysia's first-quarter GDP growth of 4.4% year-on-year fell short of estimates, the slowest pace in a year. The inflation rate in March was the lowest in four years, with headline prices rising 1.4%. The International Monetary Fund – which slashed its forecasts for world growth earlier this week – expects Malaysia's economy to expand by 4.1% in 2025. That's lower than the government's projection of 4.5%-5.5% growth that is currently under review. Rising bets on rate cuts could bolster global inflows. Malaysia has seen just US$690 million of overseas investment into conventional government bonds in the first quarter, according to central bank data. In contrast, foreigners have poured about US$2.1 billion into baht bonds this month, partially on dovish wagers on the Bank of Thailand. Regionally, Indonesia, Thailand, the Philippines and Singapore have all eased monetary policy since the second half of last year. While Bank Indonesia kept rates unchanged this week, it hinted that there was still room to resume easing. The BNM governor said earlier this month that officials have other policy tools to mitigate the impact of US tariffs. But investors remained unconvinced amid signs of decelerating domestic growth and inflation, as well as more US levies. Despite US president Donald Trump's 90-day pause on tariffs for further negotiations, his tariff policy looms large over the economy. The US imposed solar tariffs on several countries this week, including a 34.4% levy on Malaysian manufacturers. The US was the second-largest destination for Malaysian exporters in 2024 after China, underscoring the stakes involved. Trade minister Tengku Zafrul Aziz will meet US trade representative Jamieson Greer in Washington today as the country seeks relief from US tariffs. Malaysia, alongside China, Vietnam, Hungary and Mexico, 'screen as most exposed to tariff turmoil' within emerging markets, Goldman Sachs strategists including Andrew Tilton and Kamakshya Trivedi wrote in a recent note.
Yahoo
06-03-2025
- Business
- Yahoo
Malaysia Holds Rates, Upbeat on Outlook Despite Global Risks
(Bloomberg) -- Malaysia kept its benchmark interest rate unchanged on Thursday, citing robust domestic growth while cautioning of risks from the brewing global trade war. Trump Administration Plans to Eliminate Dozens of Housing Offices Republican Mayor Braces for Tariffs: 'We Didn't Budget for This' How Upzoning in Cambridge Broke the YIMBY Mold NYC's Finances Are Sinking With Gauge Falling to 11-Year Low Remembering the Landscape Architect Who Embraced the City Bank Negara Malaysia left the overnight policy rate at 3% in its second meeting this year, as predicted by all 23 analysts in a Bloomberg News survey. The last time the central bank adjusted rates was in May 2023, with a 25-basis-point hike. 'Markets are looking for steady hands on interest rate policy entering a period of heightened uncertainties on geopolitical tensions and global trades, and BNM delivered just that,' said Maybank Securities Pte head of fixed-income research Winson Phoon, adding that the key rate will likely be kept at 3% throughout 2025. The ringgit was up 0.1% at 4.4257 against the dollar, showing little reaction to BNM's decision. 'The monetary policy stance remains supportive of the economy and is consistent with the current assessment of inflation and growth prospects,' BNM said in a statement Thursday. Malaysia's steady economic growth has allowed it to resist the recent global pivot toward easing. The momentum will likely be sustained in 2025, anchored by domestic demand, the central bank said. Employment and wage growth should boost consumer spending, while public and private sector projects drive investment. The government has maintained its gross domestic product forecast of a 4.5% to 5.5% expansion this year. There are risks ahead as the global trade war deepens, and US President Donald Trump threatens to impose tariffs on semiconductor imports. The US is Malaysia's third-largest market for chip shipments. Malaysia's economy will remain resilient despite global uncertainties, BNM Governor Abdul Rasheed Ghaffour said in an interview with Bernama on Thursday. The nation's diversified economy and broad export base will help cushion any impact from external shocks, he added. Downside risks to Malaysia's growth outlook include an economic slowdown among its major trading partners and lower-than-expected commodity production. Exports could see softer expansion this year, BNM said in its statement. Inflation will remain manageable, with global commodity prices seen trending lower. The recent increase in minimum wage and civil servant salaries should have a limited impact on price pressures, the central bank said. The government has said it expects inflation to average 2% to 3.5% in 2025, an acceleration from 1.8% last year. The wide forecast range takes into account any potential flare-ups in price pressures following Malaysia's pledge to reduce subsidies for the country's most popular gasoline by mid-year. Meanwhile, the ringgit will primarily be driven by external developments and financial markets could see 'heightened bouts of volatility,' according to the central bank. Still, narrowing interest rate differentials between Malaysia and advanced economies should be positive for the currency, it said. The ringgit was the best performer across emerging markets last year, after BNM encouraged firms to repatriate their overseas income to support the currency. The monetary policy committee 'remains vigilant to ongoing developments to inform the assessment on the domestic inflation and growth outlook,' the central bank said. --With assistance from Marcus Wong, Ram Anand, Cecilia Yap and Joy Lee. (Updates ringgit's level in fourth paragraph and adds BNM governor's comments to Bernama in eighth paragraph.) The Mysterious Billionaire Behind the World's Most Popular Vapes Rich People Are Firing a Cash Cannon at the US Economy—But at What Cost? Greenland Voters Weigh Their Election's Most Important Issue: Trump Trump's SALT Tax Promise Hinges on an Obscure Loophole Snack Makers Are Removing Fake Colors From Processed Foods ©2025 Bloomberg L.P.
