Bank Negara eases dollar/ringgit transactions

Effective yesterday, local banks are allowed to transact any foreign currencies up to US$1 million (Bt35 million).
For instance, a local bank can undertake the exchange from US dollars to ringgit or vice versa for any trade up to $1 milion.
According to dealers, the notice from Bank Negara came yesterday.
Since November 11, when the US dollar started to spike against emerging-market currencies, Bank Negara has been imposing restrictions on forex transactions to curb the influence of the offshore ringgit market on onshore $/ringgit rates.
Among the restrictions were that local banks were not allowed to transact with banks not incorporated in Malaysia, exporters had to convert 75 per cent of their proceeds into ringgit and non-Malaysian banks had to attest that their $/ringgit transactions were not used to settle trades in the non-deliverable forward or NDF market.
Since November 11, transactions involving foreign currencies were handled by the central bank. 
Banks acted as conduits to customers who wanted to convert their greenbacks to ringgit for any amount.
“Effective yesterday, local banks can trade among themselves for transactions of less than $1 million. This has given marginal life for trading in the inter-bank forex market.
“But it is only a small step. Banks need a lot more leeway for trading in the inter-bank market to pick up pace,” a source said.
Bank Negara’s move to ease restrictions comes as there is some improvement in key economic data that led to an increase in international reserves.
Bank Negara’s international reserves rose to $95 billion as of January 31 from $94.3 billion on January 13.
The reserves position is sufficient to finance 8.6 months of retained imports and is 1.3 times short-term external debt, Bank Negara said in a statement.
Besides international reserves, loans to households, which have been a concern since 2015, slowed down, prompting a leading rating agency to describe the development as positive towards enhancing the asset quality of Malaysian banks and moderating household debt levels.
In a statement released yesterday, Moody’s Investors Service vice president and senior analyst Simon Chen pointed out that the continued deceleration of household loan growth would help stabilise the household leverage situation in Malaysia, which is among the highest in Asia.