"It's clear the (central bank) has been proactive in the spot market." "The NDF has moved a lot more than the spot," said Nizam Idris, head of currencies at Macquarie, noting that the one-month NDF is at 3.8720 ringgit against the dollar.
The intervention likely has provided a lot of support to the spot exchange rate, based on the spread with the non-deliverable forwards (NDF), or a forward contract in which the parties settle the difference between the spot and contract exchange rates without actually delivering the currency. "I think that reserves are probably under the psychological $100 billion mark now and I think that is starting to spook the market." dollar) and using up around $5 billion of their FX reserves," Goh said. "Domestic political developments are suddenly to the fore and on top of that we have (central bank) Bank Negara, which tried to hold the currency earlier in July at around the 3.80 level (against the U.S. That's still hovering around its weakest levels since 1998, during the Asian Financial Crisis, with the currency among the world's worst performing after falling around 10 percent so far this year. dollar was fetching as much as 3.85 ringgit in Asian trade Monday, compared with around 3.8156 ringgit Friday, before the Malaysian currency abruptly strengthened to 3.8460 against the U.S. Read More Malaysia cabinet reshuffle saps confidence Now maybe they're starting to throw the towel," Khoon Goh, senior foreign-exchange strategist at ANZ, told CNBC Monday, noting he hadn't expected the currency to hit the 3.85-handle until next year. "(The central bank) can't hold the level of the currency where it is, given that their reserves have been declining.
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