Malaysia announces new measures to boost liquidity, support ringgit


* New measures to deregulate onshore ringgit hedging mkt

* Exporters can retain only up to 25 pct in foreign currency

* Measures will take effect from Monday (Adds analyst comment)

By Joseph Sipalan

KUALA LUMPUR, Dec 2 (Reuters) - Malaysia's central bank announced new measures on Friday to boost liquidity and encourage more domestic trade of the ringgit, as it looks to stem the currency's recent slide against a surging U.S. dollar.

Bank Negara Malaysia (BNM) said in a statement that exporters could only retain up to 25 percent of export proceeds in a foreign currency, while the remainder must be converted into ringgit. Higher balances would need BNM approval, it said.

Exporters are also able to hedge and unhedge up to 6 months of their foreign currency obligations.

"Foreign currency arising from conversion of export proceeds will be used to ensure continuous liquidity of foreign currency in the onshore market," the bank said.

The new measures will take effect on Monday.

As a sweetener to keep more cash at home, the bank said all ringgit proceeds from exporters can earn a higher deposit rate of 3.25 percent per year.

Speaking to reporters, Assistant Governor Adnan Zaylani said exporters were free to convert currency to meet up to six months of loan obligations not denominated in ringgit.

The new measures also state that all payments among resident exporters should only be made in ringgit.

"Although reserves rose last month, the central bank seems to want to ensure it can boost them further through retaining 75 percent of exporters' foreign currency," said Trinh Nguyen, senior economist for investment bank Natixis based in Hong Kong.

"This is to ensure it can boost its reserve buffer through domestic sources."

The ringgit skidded to 13-month lows last month as the U.S. dollar surged after Donald Trump's U.S. presidential election win on Nov. 8.

Malaysia and other emerging economies have seen a rise in capital outflows as foreign investors sell local stocks and bonds in expectations of higher returns in U.S. markets if interest rates rise under Trump.

Last month, the central bank attempted to clamp down on offshore trade of the ringgit, which has plunged nearly 7 percent against the dollar over the last two weeks and is Asia's worst-performing currency.

While the central bank said the measures did not amount to capital controls, markets have remained jittery and its moves have had little impact, traders and analysts said.


Adnan said seven banks had said they would exit the non-deliverable forwards (NDF) market, and had discussed with BNM how to manage any impact on their investment portfolios.

"We are providing liquidity to the (onshore) market and will continue to do so as far as necessary. We do need to maintain liquidity in our markets," Adnan said.

Among other measures, it said residents could hedge and manage foreign exposure with onshore banks subject to prudential limits.

Resident and non-resident fund managers can also freely and actively manage foreign exchange exposure up to 25 percent of invested assets.

It would enhance secondary bond market liquidity via commitments of market makers and rebalance demand of foreign currency.

Malaysian ringgit NDFs added to gains after the central bank announcement. They was up nearly 1 percent at 4.4385 at 1025 GMT. (Additional reporting by A.Ananthalakshmi, Emily Chow and Liz Lee; Writing by Praveen Menon; Editing by Kim Coghill, Robert Birsel)

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