Malaysia to Switch Ringgit Fixing to Transaction Model

  • Move to boost transparency; target date for adoption July 18
  • Will also extend ringgit trading by one hour to 6 p.m.

Malaysia plans to switch the way it provides a daily reference for the ringgit’s exchange rate against the dollar next month to boost transparency, according to the central bank.

Bank Negara Malaysia will require domestic contributing banks to provide a quote for the exchange rate based on market transaction prices under the new system, rather than the current method where quotes can be given that aren’t based on actual trades, the central bank said in statement on Wednesday. A trial will begin on June 20 and the target date for adoption is July 18, it said.

The central bank will also expand the official close of trading for the dollar-ringgit to 6 p.m. from 5 p.m., although onshore banks can continue to make contracts, according to the statement. The currency doesn’t trade offshore unlike non-deliverable forwards. The new reference rate will be published daily at 3:30 p.m. local time and will be computed based on the weighted average volume of the interbank exchange rate transacted by domestic financial institutions between 8 a.m. and 3 p.m., it said.

The Southeast Asian nation tightened rules on the daily setting of the reference rate in 2013 as part of measures to shield the local market from manipulation. The move came after regulators worldwide broadened the scope of investigations beyond interbank interest rates to encompass more benchmarks after Barclays Plc was fined 290 million pounds ($411 million) for manipulating the London interbank offered rate.

The ringgit gained 0.2 percent to 4.0990 against the dollar in Kuala Lumpur Wednesday, according to prices from local banks compiled by Bloomberg. It slumped 4.9 percent this quarter in Asia’s worst performance.

(Corrects time of reference rate publication in third paragraph.)
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