KUALA LUMPUR – Malaysia’s foreign exchange (FX) reserves position can advance on the back of improving global sentiment following the Covid-19 vaccination push, which will gather speed in the second half (2H) of the year.
Public Investment Bank Bhd, in a research note today, said this will be underpinned by full economic openings, and sustained recoveries in capital markets and trade.
“Though FX reserves may be subject to some volatility in 1H amid the still-brewing headwinds of Covid-19, they are expected to improve steadily in 2H, especially when Malaysia is expected to achieve Covid-19 herd immunity by then.
“However, we remain cautious due to the impending start of the second US-China trade talks, which could begin in 2H. This may put pressure on trade and the ringgit’s risk premium, and therefore, our FX reserves position.”
Bank Negara Malaysia’s first quarter 2021 (1Q21) FX reserves jumped by US$6.9 billion (RM28.46 billion) year-on-year to end at US$108.6 billion, a rise that is consistent with regional peers.
FX reserves in ringgit terms increased by almost RM11 billion to end at RM451 billion, a multi-year high thanks to the rebound in trade and capital markets’ performance.
FX reserves at the end of 1Q21 are sufficient to finance 8.8 months of retained imports and 1.2 times the short-term external debt, an improvement against the previous quarter. – Bernama, April 15, 2021
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