KUALA LUMPUR (Feb 27): Malaysia’s central bank reiterated on Tuesday that the ringgit remains undervalued as the currency hovered near its 26-year low against the US dollar.

“Given Malaysia’s positive economic fundamentals and prospects, the ringgit ought to be traded higher,” Bank Negara Malaysia governor Datuk Abdul Rasheed Ghaffour said in a statement.

The central bank has “stepped up our engagements” with state-owned enterprises, corporations, and investors to encourage inflows, he said without elaborating.

The terse three-sentence statement came as the ringgit racked up over a 4% loss since the beginning of the year, adding to 4.3% over 2023. The ringgit was also the worst performing major Asian currency after the Thai baht and Japanese yen so far this year.

The ringgit was trading at 4.7790 against the greenback at noon on Tuesday, near its lowest of 4.88 in January 1998 during the height of the Asian financial crisis.

BNM’s latest comment came just a week after it issued a statement to say the ringgit's level, which had just dropped to its lowest in 26-years against the US dollar and hit a fresh record low against the Singapore dollar, was not reflective of the “positive prospects of the Malaysian economy going forward”, citing improvement in external demand and strong domestic spending.

Exports have shown steady improvements since the fourth quarter of 2023 while the tourism sector has recovered with tourist arrivals this year expected to exceed the pre-pandemic levels of 26 million, the central bank noted.

Investment momentum meanwhile “has picked up” with the implementation of approved projects both in the private and public sectors, BNM said.

The central bank blamed external factors for performance of the ringgit and other regional currencies, including “market adjustment to changing US interest rate expectations, geopolitical concerns and uncertainty surrounding China’s economic prospects,” Abdul Rasheed said in the Feb 20 statement.