Malaysia’s attempts to force currency traders overseas to stop selling down the ringgit, as investors flee the country’s bond market, has had little discernible impact so far, traders and analysts say.
Over a week ago, Bank Negara Malaysia demanded that offshore banks confirm through signed letters that neither they nor their corporate clients would trade the ringgit on the non-deliverable forward markets.
An NDF allows banks and companies to hedge or speculate on emerging market currencies overseas when exchange controls in those countries make it difficult to trade directly on the spot market.
Bank Negara sent the letters to about 58 firms in Malaysia that have connections to offshore ringgit trading. Only a half-dozen offshore firms signed the letters, the Bank said last week.
The move has done little to bring ringgit trading onshore so far, traders said.
“If you think the economy is not doing well, then going onshore (to trade) will hardly help, as there is a high possibility the government may slap capital controls to protect its currency or domestic markets. And that would be very painful,” said Nitin Dialdas, chief investment officer at Mandarin Capital Limited.
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