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FX news: Malaysian central bank relaxes FX rules; ringgit hits 13 year high against the dollar

Bank Negara Malaysia (BNM), the central bank, announced yesterday evening that it has ‘liberalised’ the rules on FX transactions to improve international business links.

Last night’s news comes shortly after Malaysia announced its growth figures, which saw the economy grew 8.9% year-on-year in the second quarter, and the ringgit (MYR) became the sixth currency to be listed on the Chinese Foreign Exchange Trading System today. As a consequence, the MYR hit a 13-year high against the dollar today at 3.1260.

The three new FX rules in place from today are:

1. Spot settlement of international trade between residents and non-residents is allowed to be conducted in MYR, in addition to foreign currencies. This effectively brings Malaysia a step closer towards internationalization of the MYR.

2. The limits on inter-company cross-border foreign currency borrowing are lifted.

3. Abolished limits on anticipatory hedging for current account transactions, which was set at 100% of a company's turnover in the preceding 12 months

Malaysia had previously been notoriously strict with FX regulation, but last night’s reform looks MYR positive by promoting exporter hedging and could increase non-residents demand for MYR.

Whether non-residents will actually choose to settle in MYR over other currencies remains to be seen. The announcement

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