KL will change ringgit peg only if better option found

KL will change ringgit peg only if better option found

Malaysia is not averse to changing its seven-year-old currency
peg but it will only do so if it can find a better alternative to
promote trade, investment and economic growth, a senior central
bank official said on Tuesday.

Bank Negara Malaysia deputy governor Ooi Sang Kuang said any
changes to the peg of 3.80 to the dollar, fixed since September
1998, must be weighed carefully given the possible impact on the
whole economy.

"The issue here is, if we need to change the peg, we will
change it; and if we change it, we will do so if there is a
better, alternative regime that will promote trade and investment
and growth in the economy," he was quoted as saying by Bernama
news agency.

As an open economy, Ooi said Malaysia has to shield itself
from high volatility in the exchange rate market.

At the moment, he said manufacturers strongly supported the
peg because it had enabled them to remain competitive and
profitable.

Some economists have predicted that Malaysia might move to a
managed float system by June next year but Bank Negara governor
Zeti Akhtar Aziz last week said the peg remained sustainable
despite the dollar's weakness and stressed that any change would
be based on "long-term structural considerations."

The International Monetary Fund (IMF) earlier this month urged
Malaysia to scrap the peg to manage risks associated with
increasing capital flows.

Former premier Mahathir Mohamad, who imposed the peg as part
of capital controls to shield the economy from the 1997-98
regional financial crisis, has since joined others in calling for
a review of the system as a sharp decline in the dollar's value
has made Malaysian imports costlier.-- AFP