Malaysia's central bank rejects pressure to change dollar peg
Malaysia's central bank rejects pressure to change dollar peg
Agence France-Presse, Kuala Lumpur
Malaysia's central bank on Monday rejected pressure to shift to a more flexible currency regime, saying the country's five- year-old ringgit peg to the dollar would be maintained to promote its trade and development.
Bank Negara Malaysia governor Zeti Akhtar Aziz said a stable exchange rate was necessary to boost trade and the peg would only be reviewed if significant fundamental changes occurred in the region.
"From time to time, the major currencies adjust but what we want to have in place is a system that continues to facilitate our trade and investment," she told reporters.
"Therefore, no. These kinds of developments are temporary," she said when asked if the current pressure on the dollar would affect the peg.
"We will make a review only of there is a significant, fundamental structural change that has occurred in the region."
The International Monetary Fund has said the dollar remains vulnerable in the long-term because of the United States' need to import hundreds of billions of dollars every year to finance its current account deficit.
East Asian economies which have pegged their currencies to the dollar, such as China, are reaping a windfall from the unit's depreciation as their goods become cheaper on global markets.
In return, the U.S. and Japan have been pushing China to drop its nearly decade-old currency peg of roughly 8.3 yuan to the dollar, and the European Union last week called on East Asia to share some of the trade burden of a depreciating dollar by shifting to more flexible currency regimes.
Prime Minister Mahathir Mohamad, who introduced the ringgit peg as part of capital curbs in 1998 to cope with the Asian financial crisis, has repeatedly said the peg will stay until currency trading was regulated to prevent manipulation.
Most of the curbs have since been lifted, except the peg. The government previously ruled out any review unless the dollar appreciated or depreciated against regional currencies by 20 percent and stayed there.