EFTA01379391.pdf

22 December 2017 EM Currency Handbook 2018: Still Fuel in the Tank Malaysia Bank Negara Malaysia (BNM) has a dual responsibility unwind 100% of their exposure via forwards. Liquidity of conducting monetary policy and fostering financial in onshore forwards has been picking up slowly. stability, including the FX market. The main policy instrument is the Overnight Policy Rate (OPR). On July 14 1997, during the Asian Financial Crisis, the ringgit was allowed to float. After falling by about 60%, USD/MYR exchange rate the government on September 2, 1998, announced extensive capital controls and the country's reversion 4.4 • to a fixed exchange rate. MYR was pegged at 3.80 to - the USO. Seven years later, Bank Negara announced the end of Malaysia's peg to the US dollar within 30 38 • minutes of China's de-pegging announcement on July 21, 2005, and reverted to a managed float. 32 Most capital account restrictions were progressively 2.8 dismantled after 2005, mostly the area of outward investment and fund raising activity. Government 2.4 initiatives focused on boosting inward FDI and 2.0 revitalizing domestic markets. BNM announced several so es 10 16 liberalization measures, including scrapping caps on inter-company loans, caps on FX hedging by residents, rules governing issuance of securities onshore and USDIMYR spot rate and 3M onshore forward premium offshore, and importantly, freeing up the currency Ms(13 Spot r 400 offshore for trade settlement. The MYR is traded in the 48 Foiward Points, RFC E 360 inter-bank market in China directly versus RMB. 4.4 1 300 After a long period of progressive liberalization, BNM 260 4.0 was forced to defend the currency over 2014.16, drawing down reserves sharply due to broad-based 3.6 . 200 USD strength, a decline in oil prices, domestic credit [ 150 concerns, external debt liabilities, and foreign outflows. 3.2 [ 100 Authorities also began to actively discourage overseas investment by government-linked asset managers. 2.9 1 60 12 19 14 15 16 17 In Nov 2016, after renewed USD strength and outflows, BNM adopted stronger regulatory defense of USD.:PAYR daily onshore FX market turnover the MYR. Banks were reminded of the prohibition on —FX Spot facilitating NDFs, with many global banks attesting to 9 USD 94 1.10 —RA Fenvards a Op000t RIG non-participation in offshore MYR trading. Liquidity in 8 1 CO the NDF market has significantly declined. BNM has 0.90 focused efforts on deepening onshore FX markets, to 6 o80 provide hedging capacity and liquidity. Beginning 0.70 December 2016, BNM imposed a requirement on 060 exporters to convert 75% of their proceeds into MYR. 3 050 Resident and non-resident investors were given access 2 040 to a dynamic hedging facility, wherein 25% of their 1 0.30 AUM could be actively hedged and cancelled without 0 0.20 documentation. This was liberalized to 100% in May 12 13 14 15 17 2017. Corporates with MYR assets, borrowings or Scam DO Obode/Arne /9444998404 current account flows can also freely hedge and Page 28 Deutsche Bank Securities Inc. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0076831 CONFIDENTIAL SDNY_GM_00223015 EFTA01379391