KUALA LUMPUR -- Malaysia's central bank has asked foreign banks in the country to refrain from trading the ringgit in offshore nondeliverable forwards as the currency continues to weaken.
In a statement on Wednesday, the central bank said it had made a request "through onshore banks that any non-resident banks which transact in the forex market to attest that they are not and will not engage in NDF-related transaction."
Malaysia does not recognize offshore trading of the ringgit, a measure put in place during the Asian financial crisis almost 20 years ago. Yet, the currency is traded rampantly in offshore NDF, or futures, markets as a hedging instrument and the rate quoted tend to veer lower than onshore spot rates.
The directive came after the currency declined sharply last week on expectations of an imminent interest rate hike after Donald Trump won the U.S. presidential election having promised during the campaign to raise infrastructure spending.
The U.S. dollar has risen to 4.39 ringgit on Thursday, up 4.5% from Nov. 8.
The central bank also denied a Reuters report that it asked foreign banks to make a written commitment to cease the trading of NDFs. It had warned in a statement on Sunday that it was taking "measures to reinforce" existing rules to prohibit the trading of ringgit futures.