Malaysia's central bank said exporters will no longer be obligated to convert most of their proceeds into ringgit, relaxing a rule introduced in 2016 to boost onshore trading of the currency.
Bank Negara Malaysia also said it will allow companies more flexibility for hedging of foreign currency obligations and allow non-resident corporations to trade in ringgit-denominated interest rate derivatives.
Governor Nor Shamsiah Mohd Yunus said the measures were an effort to give "greater flexibility" amid volatile markets.
"Because financial markets are going to be much more volatile, so the corporates and exporters will need greater flexibility in managing their foreign currency exposure," Nor Shamsiah said at a news conference after the release of second-quarter data that showed a sharper-than-expected slowdown in Malaysia's economic growth.
This year, the ringgit has been emerging Asia's strongest-performing currency, shedding only about 1.4 per cent against the surging US dollar. There was muted reaction in spot trading to Friday's announcement.
In late 2016, as the ringgit was sliding, the central bank asked exporters to retain up to 25 per cent of export proceeds in a foreign currency, while the remainder had to be converted into ringgit.
The measure was introduced to stem the currency's decline and to encourage domestic trade of the ringgit.
It was introduced during the tenure of Muhammad Ibrahim, who resigned as governor in June less than halfway through his five-year term and weeks after the shock election loss of Najib Razak, the prime minister who appointed him.
Nor Shamsiah was named as governor by the new administration led by Mahathir Mohamad.
At the news conference, Nor Shamsiah said the 2016 rules restricting trading in ringgit non-deliverable forwards (NDFs) will remain in place.
The three measures announced, all effective immediately, are to reduce the administrative burden faced by exporters in meeting the 2016 rules, she said.
Re-dessiminated by The Asian Banker from The Business Times