Attacks on regional currencies 'may spread'

Attacks on regional currencies 'may spread'

KUALA LUMPUR (Dow Jones): With Russia the latest country to devalue its currency in the face of growing market pressure, Malaysia's Prime Minister Mahathir Mohamad yesterday warned that speculative attacks on developing countries may spread.

"I'm worried that if the attacks on developing nations' currencies continue, the pressure will spread to other countries that could have prevented it," Mahathir told a gathering of workers to mark the country's labor day.

"The currency attack is now at dangerous and irresponsible levels," he added.

On Monday, the Russian central bank ended months of speculation and denials by effectively devaluing the ruble by 33.6 percent, as well announcing the forced restructuring of domestic debt and a moratorium on ruble-denominated debt owed overseas.

The devaluation move just came weeks after the International Monetary Fund cobbled together a near-$23 billion package to stabilize Russia's stressed financial markets. Since Thailand devalued its baht last July, much of East Asia has been hit with massive currency depreciations which have spread as far as South Africa, Eastern Europe and now Russia.

"Russia has a nuclear bomb, they may want to use it now," Mahathir joked.

Mahathir has repeatedly stated his belief that Western interests are hell-bent on destabilizing Asian and other developing countries. He argues that shadowy forces use financial markets to wipe out wealth and topple governments, and that sudden flows of capital should be reined in.

In Southeast Asia, only Mahathir and Singapore's Prime Minister Goh Chok Tong, have managed to stay in office over the last year or so.

Mahathir's words don't appear to be lost on the international community. Agencies such as the International Monetary Fund and World Bank, as well as individual governments, are now assessing the need for curbing potential destabilizing capital flows in the global financial system.

The blunt-speaking premier also expressed his view that since foreign powers have successfully crippled the country's economy, they are now preventing Malaysia from recovery.

Citing recent downgrades on Malaysia's sovereign credit worthiness by Moody's Investors Service and Standard & Poor's, Mahathir said "They purposely lowered our ratings so that we cannot afford to pay the interest rates."