New guidelines for US$/ringgit fixing

BANK NEGARA Malaysia yesterday issued new guidelines for the daily setting of the US dollar to ringgit fixing.

The tighter rule states that effective today the fixing calculation will be based on contributing banks' market quotes as at 11am.

The quotes will have a bid and ask spread of not more than 10 pips from the current 20 pips.

According to Bank Negara Malaysia, the revised methodology for the fixing will ensure that the rates used are tradeable and the derived fixing rate reflects the market rates.

"This is a collaborative effort between Bank Negara Malaysia and Persatuan Pasaran Kewangan Malaysia, which is aimed at enhancing the quality and integrity of the US$/ringgit fixing process," the central bank said yesterday.

The ringgit was quoted at 3.0895/0915 to the US dollar at 5pm yesterday.

Commenting on the latest move by Bank Negara, Maybank Forex Research said these new rules are unlikely to have a significant impact on US$/ringgit movements.

"Instead, it should help reinforce confidence in the daily fixing as transparency and reliability would increase.

" There was no adverse reaction to the news so far with the US$/ringgit lower today (Thursday) with the return of global risk appetite," it said.

Maybank's foreign exchange bureau said it continues to expect election uncertainty, dollar strength and eurozone volatility to weigh on the ringgit despite initial strength at the beginning of the year.

"We reiterate our estimate for US$/ringgit at 3.09 in the first quarter and 3.05 (second quarter) before gradually strengthening to break below the RM3 level at RM2.98 by end 2013," it said.