Malaysia not to revise currency peg

Malaysia not to revise currency peg

Associated Press, Kuala Lumpur

Malaysia will not revise the ringgit's peg to the U.S. dollar "in the near future" because it is not undervalued compared to other Asian currencies, the government said on Thursday.

Deputy Prime Minister Najib Razak said the peg provided stability and competitiveness for Malaysian exports.

"Our current assessment is that the ringgit is not significantly undervalued compared to a range of regional currencies," he said in a speech at a conference on Malaysia's economic outlook.

"Given an expected slowdown in the world's economy and weakening export environment, the government believes the peg continues to provide much-needed predictability and competitiveness for Malaysian exports," he added.

Najib's remarks were among the strongest so far from government officials on the peg, even as speculators continue to bet on a ringgit rise by raising their exposure to Malaysian equities and debt.

Former leader Mahathir Mohamad, who introduced the 3.80 ringgit-to-a-dollar peg six years ago, suggested in January that the policy should be reviewed because the weak dollar has made imports expensive.

While the peg helped stabilize the economy during the 1997- 1998 Asian financial crisis, the ringgit has depreciated against most major currencies with the fall in the dollar's value in recent months.

In the last year, the ringgit dropped by 4.1 percent against the euro, 5.1 percent against the British pound and 3.2 percent against the yen.

There has been broad speculation in the market in recent months that Malaysia will let the ringgit strengthen this year, as some economists have recommended, given the country's strong economic position and expectations for continued growth.

Gross domestic product growth is expected to have reached 7 percent in 2004, to be followed by an estimated 6 percent this year, the government has said. Many economists say a fair value for the ringgit is now between 3.30 and 3.50 to a dollar.