KL won't stop rise of ringgit

KL won't stop rise of ringgit

KUALA LUMPUR (AFP): Malaysia's central Bank Negara would not stop the ringgit's current bullishness in the open market unless the situation warranted its intervention, deputy finance minister Wong See Wah said Saturday.

"It has always been the central bank's policy to let the ringgit dictate its own movement against major currencies, especially the U.S. dollar, by floating it in the open market," Wong was reported saying by Bernama news agency.

He said the ringgit's current rise against the U.S. dollar was not as sharp as last year when it triggered a surge in inflow of "hot" speculative funds to prompt stern measures to check the situation.

Bank Negara imposed a series of capital controls in January 1994 after money suddenly poured into the banking system.

"Unless the hot money situation re-emerges, which is not very beneficial to the system, we will continue to let the ringgit move on its own strength," Wong assured.

The assurance came after the ringgit's surge against the U.S. dollar in recent weeks on rising demand from offshore dealers, mainly in Singapore and Hong Kong.

It closed this week at 2.4432 from 2.4408 last Friday.

The local unit hit a new nine-year high of 2.4375 on Thursday, a level last reached in 1986. Forex dealers said the local currency could rise to 2.40-2.41 to the dollar in the next few months given Malaysia's robust growth.

The Malaysian economy is into its ninth year of robust growth exceeding eight percent a year, with growth in the first quarter of 1995 officially estimated at 9.9 percent.

Economists have said the central bank could be waiting at a stronger ringgit before allowing local interest rates to move up to cool an overheating economy.

The ringgit was at a record high of 2.1095 to the dollar on Oct. 31, 1978, after it was floated and pegged against a basket of currencies in 1973.