Malaysia’s central bank, Bank Negara, has announced the loosening of foreign exchange controls as it further liberalises the local FX market.
Under the new regulations, local companies will no longer need to convert foreign earnings back into Malaysian ringgit before re-converting to another currency at a later date, instead exporters will be allowed to automatically sweep export proceeds into their trade foreign currency accounts maintained with onshore banks to meet up to six months’ foreign currency obligations. These companies will have to establish their six months’ foreign currency obligations with their respective onshore banks, however.
Bank Negara has also moved to allow greater flexibility (upon application to the Bank) for Malaysian residents to hedge foreign currency obligations beyond six months; and foreign currency exposures arising from invoices issued in foreign currency under international pricing practices for domestic trade in goods and services.
In a third move, the central bank has also provided wider access to the onshore market for non-residents. It says non-resident corporations are allowed to trade in ringgit-denominated interest rate derivatives via appointed overseas offices, subject to back-to-back arrangements with onshore banks. This aims to further deepen the onshore market for interest rate derivatives to support risk management by businesses, Bank Negara says.