Economic Highlights : Foreign Exchange Reserves Fell To US$95.3bn As At 31 March - 07/04/2010

The foreign exchange reserves fell by US$1.5bn in 2H March to US$95.3bn as at 31 March, compared with a decline of US$0.04bn in 1H March. This suggests that the repatriation of export proceeds and some inflow of foreign portfolio funds were offset by the payment for import bills. Although the foreign portfolio investment in fixed income papers fell by RM1.0 in February, the first decline in eight months and compared with an increase of RM4.1bn in January, we believe the decline is likely to be temporary and the holding of fixed income papers by foreign investors is likely to bounce back in the months ahead. Meanwhile, total holdings in fixed income instruments by foreign portfolio investors fell to RM72.3bn at end-February, after rising to a 17-month high of RM73.3bn at end- January (Chart 1). In ringgit terms, the foreign exchange reserves fell by a larger magnitude of RM20.0bn in 2H March to RM311.7bn as at 31 March, compared with a decline of RM0.1bn in 1H March. This was due mainly to a revaluation loss, following the appreciation of the ringgit against major currencies in 1Q 2010. The ringgit appreciated by 4.3%, 5.5% and 11.5% against the US dollar, yen and euro respectively during the period. At the current level, the foreign exchange reserves are sufficient to finance 8.8 months of retained imports and cover 4.0 times the short-term external debt of the nation, compared with 7.9 months of retained imports and 4.0x of shortterm external debt cover a year ago.

Economic Highlights : Foreign Exchange Reserves Fell To US$95.3bn As At 31 March - 07/04/2010