Kuala Lumpur: The depreciation of the ringgit is driven by global phenomena and market influences, the Finance Ministry (MOF) said.
In a written answer published on the Parliament’s website, the ministry said the depreciation of the ringgit to RM4.74 against the US dollar in September 2022 was not due to the weakness in the country’s economic fundamentals or the failure of measures taken by the government through Bank Negara Malaysia (BNM).
It said the world experienced a shock in 2022 when the US Federal Reserve (Fed) raised interest rates with a large magnitude of 425 basis points (bps) in a short period between March and November 2022 to address the issue of high inflation.
The ministry said the increase in US interest rates, which are high and more aggressive compared to other central banks, had pushed the value of the US dollar currency higher compared with most global currencies, including the value of the ringgit.
“Malaysia through BNM only raised interest rates gradually with a cumulative increase of 100 bps in four increments from May to November 2022.
“This situation caused the ringgit exchange rate against the US dollar to depreciate by 12.2% from January to November 4, 2022,” it said.
MOF said this in response to a question from Pang Hok Liong (Labis-PH) who stated that the depreciation of the ringgit was due to the failure of measures taken by BNM and what were the immediate measures needed to contain the ringgit’s deterioration.
The ministry said BNM’s approach is focused on ensuring that the ringgit adjustment is done in an orderly manner, thus, helping businesses plan and implement spending and investment decisions properly.
It added that the risk from a sharp decline in the ringgit’s exchange value against the US dollar is also mitigated by using hedging instruments as well as emphasising prudent external borrowing and the depth of the domestic currency market.
