Malaysian govt to stop defending weak ringgit

Malaysian govt to stop defending weak ringgit

KUALA LUMPUR (AFP): The Malaysian government will stop defending the ringgit, which has been battered in recent weeks by currency speculators, Premier Mahathir Mohamad said in remarks published Saturday.

"We are satisfied with the ringgit's position. Although its value has dropped, we will not do anything. We are confident that it will recover," Mahathir was quoted as saying in The Star newspaper.

"If we continue to defend the ringgit, they (speculators) will get profits. We do not want to give them such profits," the premier said, adding the ringgit did not suffer as much as the currencies of some other countries.

The local unit had plunged by about four percent against the U.S. dollar in July amid regional currency turmoil, set off when the Thai baht was floated on July 2.

Malaysia's central Bank Negara had said reserves plunged by about 8.8 billion ringgit (US$3.38 billion) to 61.9 billion ringgit in the two weeks to July 15, apparently reflecting intervention to support the ringgit.

The central bank Monday imposed a new ruling limiting non- commercial ringgit sales to two million dollars per foreign customer to curb speculation.

But the ruling caused a liquidity squeeze in the money market and drove interest rates up and Bank Negara was forced to inject funds into the money market to ease rates early in the week.

Analysts said Bank Negara could have come under pressure to take action following Mahathir's recent strong remarks against rogue speculators, who he alleged were led by U.S. billionaire financier George Soros.

Soros and U.S. government officials dismissed that charge.

Asked why he had changed his mind on defending the ringgit, Mahathir said: "There is no change. As a matter of principle, I still oppose the idea that somebody can fiddle around with our currency. We have lost our sovereignty."

The Malaysian leader did not indicate whether he would agree to a request by Soros for a meeting at the September International Monetary Fund-World Bank annual meeting in Hong Kong to discuss the issue.