Malaysia's Foreign Exchange Policy: onshore ringgit, hedging and foreign currency investment

What is Malaysia's Foreign Exchange Policy?

The FEP Notices are issued under section 214 of the Financial Services Act 2013 and section 225 of the Islamic Financial Services Act 2013. They give BNM's approval for transactions that would otherwise be prohibited under Schedule 14 of those Acts, and set the conditions attached. A transaction in Schedule 14 that the Notices do not approve needs BNM's written approval, and breaching the Notices is an offence under section 214(9) of the FSA or section 225(9) of the IFSA.

The current Notices came into operation on 1 October 2025 and revoked those issued on 15 November 2024. They are published with an Interpretation section and seven Notices:

• Notice 1: Dealings in Currency, Gold and Other Precious Metals
• Notice 2: Borrowing, Lending and Guarantee
• Notice 3: Investment in Foreign Currency Asset
• Notice 4: Payment and Receipt
• Notice 5: Securities and Financial Instruments
• Notice 6: Import and Export of Currency
• Notice 7: Export of Goods

What are licensed onshore banks and Appointed Overseas Offices?

Most ringgit foreign exchange business runs through licensed onshore banks (LOBs). The FEP defines an LOB as a licensed bank or licensed investment bank under the FSA, or a licensed Islamic bank under the IFSA. BNM's rules for residents exclude international Islamic banks when residents buy or sell foreign currency against ringgit.

An Appointed Overseas Office (AOO) is an office outside Malaysia, within or outside an LOB's banking group, that BNM has approved. Non-residents can deal in ringgit foreign exchange directly overseas through AOOs, which widens price availability and liquidity outside Malaysian trading hours. BNM's AOO page, with lists dated 14 October 2026, shows 213 AOOs across 23 banking groups in 36 jurisdictions.

How can residents buy, sell and hedge foreign currency?

• Spot: a resident may buy or sell foreign currency against ringgit with an LOB on a spot basis.
• Forwards: a resident may deal forward with an LOB on a firm commitment or anticipatory basis. The forward must be terminated if the commitment ends or the anticipated transaction does not happen.
• Unwinding: a resident may unwind a forward with any LOB, except where the underlying commitment is a portfolio investment.
• Derivatives: a resident may hedge foreign currency derivatives (other than exchange rate derivatives) offered by a resident up to the net open position of the foreign currency exposure.
• Group dealing: a resident entity may deal with an LOB on behalf of entities in its group, provided the principal is not a financial institution.
• Foreign currency against another foreign currency: allowed on a spot or forward basis with an LOB.

How can non-residents hedge ringgit exposure?

• Spot: a non-resident may buy or sell foreign currency against ringgit for any purpose with an LOB or an AOO.
• Forwards: allowed with an LOB or AOO for current account transactions on a firm commitment or anticipatory basis, and for financial account transactions on a firm commitment basis.
• Unwinding: allowed with any LOB or AOO, except where the underlying is a portfolio investment.
• Interest rate derivatives: any non-resident, with or without an underlying exposure, may trade ringgit interest rate derivatives with an LOB or an AOO.
• Investment: non-residents may invest in ringgit or foreign currency assets in Malaysia without restriction, open ringgit or foreign currency accounts with LOBs and repatriate proceeds, profits and income. Repatriation is made in foreign currency.

What is the Dynamic Hedging Framework?

The Dynamic Hedging Framework lets institutional investors registered with BNM hedge actively through forwards with LOBs, or AOOs for non-residents, without showing documentary evidence. Registration is a one-off submission to BNM.

• Resident institutional investors may sell foreign currency against ringgit forward for up to 100% of their foreign currency securities holdings, and of deposits from selling those securities held for up to three months pending reinvestment.
• Non-resident institutional investors may buy foreign currency against ringgit forward for up to 100%, and sell foreign currency against ringgit forward for up to 25%, of their ringgit exposure. That exposure covers ringgit securities on RENTAS or Bursa Malaysia and related deposits held for up to three months pending reinvestment.
• Registered investors may unwind these forwards with any LOB, or any LOB or AOO for non-residents.

How much can residents invest in foreign currency assets?

Notice 3 sets the rules. A resident individual or entity without domestic ringgit borrowing may invest any amount in foreign currency assets. A resident with domestic ringgit borrowing may invest:

• any amount using foreign currency funds from outside Malaysia (other than export proceeds) or from an approved foreign currency borrowing;
• for individuals, sole proprietorships and general partnerships, up to RM1 million equivalent per calendar year, in aggregate, funded by converting ringgit, from a Trade FCA, or by swapping ringgit financial assets for assets abroad or in a Labuan entity;
• for entities, up to RM50 million equivalent per calendar year, aggregated with other resident entities in a parent-subsidiary relationship, from the same sources plus foreign currency borrowing from an LOB for purposes other than direct investment abroad; and
• for entities, any amount funded by foreign currency borrowing from an LOB for direct investment abroad.

What counts as domestic ringgit borrowing?

Under the FEP Interpretation, domestic ringgit borrowing is any ringgit borrowing a resident obtains from another resident, or any obligation the Notices treat as such. A resident entity is treated as having domestic ringgit borrowing if another resident entity in a parent-subsidiary relationship with it has such borrowing.

Some facilities do not count: borrowing from another resident entity in a parent-subsidiary relationship, borrowing from a direct shareholder, and credit facilities used only for sundry or employees' expenses. LOBs, licensed insurers and licensed takaful operators may invest any amount in foreign currency assets for their own account, and fund managers, unit trust companies and insurers investing for clients follow separate limits in Notice 3.

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