Malaysia's Ringgit crackdown spooks overseas investors

(Feb 7): Malaysia’s crackdown on currency speculators has come at a cost. While it successfully reduced ringgit volatility, it is threatening to discourage overseas investors.

The central bank’s steps to curb trading in offshore non-deliverable forwards last year has made it harder for global funds to hedge their exposure to Malaysia, according to Macquarie Bank. Global funds cut holdings of Malaysian debt by a combined 25.2 billion ringgit ($8 billion) in November and December, the biggest two-month outflow since 2008, central bank data show.

The difference between onshore and forward prices for the ringgit jumped to a record in November, spurring the central bank to crack down on NDF trading. Since then, the currency’s volatility has dwindled to the lowest in four years, while the ringgit slid to the weakest since 1998 even as oil prices showed signs of recovery and the central bank dismissed speculation it was about to impose capital controls.

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