KUALA LUMPUR, Oct 9 — The ringgit was one of the best-performing currencies globally in the third quarter of this year (3Q2024), strengthening 14.4 per cent against the US dollar and 11.4 per cent on a year-to-date basis, said Bank Negara Malaysia’s (BNM) Financial Markets Committee (FMC).

The local currency’s performance was primarily driven by the United States Federal Reserves’ 50 basis points policy rate cut and greater clarity on the trajectory for further reductions, the FMC said in a summary of its Oct 1 meeting released today.

"Notwithstanding the stronger performance, the committee noted key developments that support the sustained positive performance of the ringgit, including the ongoing coordinated efforts by the government and BNM to encourage repatriation and conversion of foreign income proceeds by government-linked companies, government-linked investment companies and corporates.

"They have contributed to ample domestic foreign exchange (forex) market liquidity, which recorded an average daily volume of US$17.6 billion,” it said.

FMC added that the current arrangement can be sustained to ensure better liquidity in the onshore forex market.

It also noted that investor confidence in Malaysia has improved due to the nation’s robust economic growth and the government’s continued commitment to structural reforms.

"Significant foreign portfolio inflows were observed in the 3Q 2024 amidst the strong KLCI performance and normalising Malaysian Government Securities (MGS)-United States Treasury (UST) spread,” it said.

The committee members also opined that the frequent investor engagements by the authorities were beneficial in raising awareness about Malaysia being an attractive investment destination, and reaffirmed the importance of continued policy coherence and consistency.

"Members shared observations of corporate behavioural changes amidst the recovery of the ringgit.

"There was a shift in sentiment that led to more interest for conversion of export proceeds among exporters, and importers have also reduced their front-loading tendencies by purchasing only required quantities for their business activities,” it said.

The committee also discussed strategies to enhance the domestic bond and sukuk market, deliberating on measures to enhance liquidity and widen the investor base in the corporate bond and sukuk market.

"In the near term, key initiatives include the introduction of corporate bond and sukuk trading as part of the assessment on market development efforts in the Principal Dealers’ framework.

"It also includes investor engagement sessions with key industry stakeholders to familiarise non-residents with Malaysian corporate names and sukuk structures in addition to Malaysian government bonds,” it said. — Bernama