Foreign Exchange Reserves Drop in November

Economic Research	8 December 2016
Malaysia
Economic Update
Foreign Exchange Reserves Drop in November Malaysia’s foreign exchange reserves fell by USD1.9bn to USD96.4bn as at 30 Nov, mainly due to portfolio investment outflows and possibly the Central Bank’s intervention in the forex market to smoothen the sharp fluctuation of the ringgit, as emerging markets suffered sell-offs following Donald Trump’s victory in the US presidential election. We expect the MYR to recover gradually over time after this round of volatility, when markets return to calm with more clarity from the Trump presidency. Even so, volatility could persist in the near term. Forex reserves remained adequate by international standards. The current level of foreign exchange reserves is sufficient to finance 8.3 months of retained imports (vs 7.4 months a year ago). Similarly, the reserves covered 1.2x the short-term external debt of the nation (1x a year ago). Economist:  Vincent Loo Yeong Hong  | +603 9280 2172 Economist:  Aris Nazman Maslan  | +603 9280 2184