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.