The Financial Markets Committee (FMC) would like to provide an update following the last note on 9 December 2016. Liquidity in the onshore foreign exchange (FX) market continues to register a daily average volume of around USD9 billion across all FX transactions towards end-2016. This is comparable to the average volume of USD8 billion from January to November 2016. The disruptive influence from the non-deliverable forward (NDF) market has also subsided. Against the backdrop of a stronger USD and continued uncertainties, ringgit intraday movement is now averaging around 90 points, lower than the daily average of  228 points  and a high of 600 points (measured through difference between the highest and lowest exchange rate in the interbank market during the day) in November. FX flows comprise supply and demand from all major participants, including the exporters/importers and customers for portfolio and FDI purposes. As the demand and supply of the USD/MYR becomes more realigned, onshore FX market will further stabilise and  lead to better cost of hedging and facilitate businesses in managing their FX risks.

The market has responded positively to the fund manager hedging framework, which allows registered fund managers to actively manage up to 25% of their invested portfolio. To date, 10 fund managers, including  residents and non-residents, have registered with Bank Negara Malaysia with a total asset under management (AUM) eligible under the framework of RM41.8 billion. Fund managers have started to utilise this flexibility. In the secondary bond market, there continues to be two-way flows from both resident and non-resident investors with an average bid-offer spread of 3 basis points for benchmark securities. Trading activities remain robust with average daily trading volume of RM4.5 billion and month-to-date volume of RM52.8 billion.

Resident companies recorded net export conversion to ringgit in excess of RM2 billion in December 2016, as compared to the higher holdings of foreign currency by exporters between January to November 2016. In addition to maintaining 25% of export proceeds in foreign currencies, exporters are allowed to reconvert their export proceeds to meet their projected loans and imports obligations for up to 6 months ahead. Preliminary December data indicated that around 57% of the proceeds are reconverted for this purpose. Remaining proceeds in ringgit enjoy a return of 3.25%.

FMC, together with Bank Negara Malaysia, would like to reiterate the commitment to promote a conducive financial market environment and will continue to work with market participants in forging the way forward.

Financial Markets Committee
28 December 2016

About Financial Markets Committee (FMC)
The FMC is a committee established by BNM in May 2016 and comprises representatives from Bank Negara Malaysia, financial institutions, corporations, financial service providers and other institutions which have prominent role or participation in the financial markets. The Chair of the FMC is BNM Assistant Governor Adnan Zaylani.

The objective of FMC is to broaden the industry engagement with a focus in reviewing and formulating comprehensive strategies for the wholesale financial markets to meet the diverse and complex demands of a more developed and internationally integrated economy.

For more information on the FMC, please refer to the following link: Link