p11 ringgit dollar 1273933 20200708204605KUALA LUMPUR: A status quo in Malaysia's key policy rate is not expected to adversely affect the ringgit, which has risen by nearly 0.5 per cent vis-a-vis the US dollar since early July.

Bank Negara Malaysia is set to update its key Overnight Policy Rate (OPR), which stands at 3.00 per cent currently, at 3pm today. The central bank is widely expected to stand pat as most of its Asian peers.

The strength or weakness of the ringgit is dependent on a myriad of factors, not mainly on the OPR, said economists.

Malaysia University of Science and Technology economist Dr Geoffrey Williams said as the OPR remains steady, he anticipates minimal impact on the value of the ringgit.

Williams said this stability is attributed to the fact that market expectations have already factored in the OPR's status quo, adding that the ringgit's recent fluctuations were influenced by familiar factors.

"The ongoing fluctuations in the ringgit's value are primarily driven by external elements, including the international geopolitical landscape, the appeal of the US dollar as a safe haven, and economic policies in foreign nations - factors largely beyond Malaysia's control," he told the New Straits Times.


Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said the OPR decision has always been associated with domestic economic conditions rather than to preserve the value of the ringgit.

Notably, Afzanizam said Malaysia's current account continues to maintain a surplus, largely bolstered by international trade.

"Moreover, the nation's banking system boasts strong fundamentals, characterised by ample capitalisation, high liquidity and robust risk management practices.

"This would mean the intermediation of funds by the banks is business as usual. Therefore, we believe the OPR decision would be based on supporting the domestic economy," he said.

Center for Market Education chief executive officer Carmelo Ferlito believes that there is no reason for an increase or a decrease in the OPR this time.

Any action on it would be most probably ineffective, he added.

He also believes that the ringgit can have long-term effects because of the OPR.

"(The ringgit) performances are mostly linked to the international economy as well as domestic scenario and policy orientation.

"I do not think that keeping the OPR unchanged will stimulate the economy. There is an overestimation, in my opinion, of the role of the OPR on the economy and often the distortive effects that artificial manipulation of the OPR can have on the economy," he said.

On Tuesday, the local note fell to 4.6615/6655 against the greenback from Monday's close of 4.6535/6575.

So far this year, the ringgit was down 6.07 per cent against the US dollar.