(Bloomberg) -- The rally in Malaysia’s ringgit, which climbed to a three-year high this week, is likely to last given the nation’s favorable economic outlook and reforms, according to the central bank.
“Malaysia’s positive economic prospects and structural reforms, complemented by initiatives to encourage flows, will continue to provide enduring support to the ringgit,” Bank Negara Malaysia said in an emailed response to questions from Bloomberg News on Wednesday.
Bank Negara’s comments suggest that policymakers aren’t too worried over the ringgit’s 14% surge this quarter that has made it the top performer across emerging markets. The rebound in exports and about $3.6 billion of foreign inflows into the nation’s bonds and equities this quarter have boosted the currency.
The ringgit slipped 0.3% to 4.1427 per dollar on Thursday. The currency rose to as high as 4.1080 per dollar this week, the strongest since June 2021.
Breather
Given the sharp gains in the ringgit, the currency may take a breather, Lloyd Chan, currency strategist at MUFG Bank Ltd., wrote in a note Thursday.
Central bank Deputy Governor Adnan Zaylani Mohamad Zahid said on Wednesday the ringgit’s appreciation also followed “greater clarity on the interest-rate path of developed countries, especially the US Federal Reserve.”
“The narrowing of interest-rate differentials with the US would be conducive to favor portfolio inflows, especially given Malaysia’s positive economic prospects,” he said in a speech at the IFN Asia Forum in Kuala Lumpur.
READ: Ringgit’s Best Quarter in 50 Years Has Traders Baying for More
Bank Negara Malaysia kept rates unchanged at its September decision, with the deputy governor noting in a Bloomberg Television interview earlier this month that the benchmark will likely be held at current levels this year.
Prime Minister Anwar Ibrahim’s government is seeking undo hefty subsidies and broaden its revenue base to boost investors’ confidence in the country. He allowed diesel prices to float in June to strengthen the nation’s finances.
--With assistance from Kanupriya Kapoor and Atul Prakash.
(Updates with comment from analyst in fifth paragraph.)
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