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 Muhammad Ibrahim, 56, comes in at a time when Prime Minister Najib
Razak faces political pressure and the economic challenges are the
biggest since the 1997-98 Asian financial crisis.
Making the appointment on Wednesday, Najib expressed confidence that
under Muhammad's leadership, Bank Negara Malaysia "will continue
assisting the government with advice to further strengthen
Malaysia's economy, as well as managing monetary policy, and
regulating and developing the financial services industry".
Markets players see Muhammad as a non-political candidate approved
by outgoing governor Zeti Akhtar Aziz.
The appointment "is positive on the ringgit as the new governor is
from the central bank rather than the government", said Qi Gao, an
emerging Asian currency strategist for Scotiabank in Hong Kong.
The ringgit <MYR=MY> turned firmer after the announcement and
strengthened to 3.9080 per dollar. It stood at 3.9110, up 0.4
percent from the previous close, as of 0824 GMT.
Qi said that if the Federal Reserve remained "dovish" at its meeting
this week, "we will see more portfolio inflows to Malaysia".
Muhammad, who will begin a five-year term on May 1, will chair his
first policy meeting on May 19. His first public appearance should
be when first quarter growth figures are announced on May 13.
In a statement, Zeti said Muhammad's appointment was positive.
"Being part of our policy team at the bank will provide continuity
and the much needed certainty in this prevailing period of great
uncertainty," she said.
ZETI'S STEADY HAND
After Zeti's steady hand on the tiller for 16 years, businesses and
investors will be looking for policy continuity and assurances about
the central bank's independence.
"Clearly we got a good outcome today... wouldn't really say it's a
game changer for the economic situation, but what it basically says
is we going to get policy continuity from the central bank," said
Brian Tan, a Singapore-based analyst with Nomura.
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Last year, the ringgit was Asia's worst performing currency, losing
nearly 19 percent against the U.S. dollar as the economy was hit by
tumbling commodity prices and by a political crisis engulfing Najib,
after reporting of foreign transfers made into a personal bank
account, and state-run fund 1Malaysia Development Berhad, which has
huge debts.
This year, the ringgit has strengthened, though economic concerns
including weak consumption remain.
Zeti, who steps down on April 30, was named as one of the world's
best central bank chiefs by Global Finance magazine in 2009.
Muhammad had been one of Zeti's deputies since 2010. During a career
spanning 32 years with the central bank, Muhammad held a key role
during the Asian financial crisis as managing director of Danamodal
Nasional Berhad, a bank recapitalization agency.
The new governor is a member of the central bank's monetary policy
committee and is an independent director on the board of national
oil firm Petronas.
A chartered accountant and University of Malaya graduate, he holds a
master's degree from Harvard University and a postgraduate diploma
in Islamic banking and finance from the International Islamic
University Malaysia.
Southeast Asia's third-largest economy grew 5 percent in 2015,
slowing from 6 percent in 2014. In January, Najib cut this year's
forecast to 4.0-4.5 percent from 4.0-5.0 percent.
(Additional reporting by Rozanna Latiff and Emily Chow; Writing by
Praveen Menon; Editing by Richard Borsuk and Nick Macfie)
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