Kuala Lumpur, 11th April – Malaysia’s international foreign exchange reserves reached a new high of RM509.9 billion (US$115.5 billion) at the end of March, due to the continuous inflow of foreign capital into the Malaysian financial market. This represents a 1% increase from the previous month and sets a new record high in the past year.
According to a statement by Bank Negara, the reported amount of US$115.5 billion is enough to finance 5.1 months of import demand and repay 1.1 times short-term foreign debt.
The increase in reserves is mainly attributed to the rebound of 9.8% in foreign exchange reserves to US$103.1 billion (about 454.8 billion), setting a 14-month high, as well as a rise in gold reserves by 8.7% to US$2.5 billion (about 11 billion), marking the highest holdings.
Kenanga Investment Bank Research has predicted that the country’s exchange rate against the US dollar could be at 4.11 for the year, benefiting from a possible shift by the Federal Reserve to accommodative policy and Malaysia’s relatively strong economic outlook and political stability. However, the bank warned that the ongoing banking crisis in European and American countries, as well as geopolitical turmoil, could hold back the trend.
Despite the optimistic outlook, Kenanga Investment Bank Research expects Bank Negara to maintain the Overnight Official Rate (OPR) at 2.75% in May, given the downward trend in headline and core inflation, and the continued slowdown in the global economy.
The bank also believes that BNM is likely to maintain the current interest rate policy in the second half of this year, as it believes BNM’s rate normalization cycle has reached its end.
However, any unexpected shock to financial markets or rising geopolitical risks may prompt BNM to reconsider its stance and adjust monetary policy accordingly.