Malaysia's forex reserves plunge $3.4b in two weeks
Malaysia's forex reserves plunge $3.4b in two weeks
KUALA LUMPUR (AFP): Malaysia's central bank said yesterday that the country's foreign exchange reserves plunged US$3.4 billion in the first half of July, apparently reflecting intervention to support the ringgit.
Bank Negara Malaysia said reserves fell from 70.705 billion ringgit ($27.2 billion) on June 30 to 61.898 billion ($23.8 billion) on July 15.
Asked about the steep decline, Prime Minister Mahathir Mohamad said he had to hear details before he could determine the cause of the fall.
"Whether it is a cause of defending or not," he told reporters on his return from a two-month break abroad, "I have to listen to the details about this first. You just cannot make a decision on the basis of one factor alone."
But TA Securities senior economist Anthony Dass said the fall in foreign exchange reserves reflected efforts to prop up the ringgit, which like other regional currencies has been hit by a wave of selling following the Bank of Thailand's decision to float the baht at the beginning of this month.
"They were aggressively defending the ringgit resulting in the reserves coming down," he said. "It has been a very costly affair."
Dass said Bank Negara should not have defended the Malaysian currency.
"They should have let the ringgit go and let market forces determine everything. Then the central bank would not have lost so much in reserves and interest rates would not have been this high," he said.
Speaking on his return home Tuesday, Mahathir denounced currency speculators for using their freedom as a "political weapon" against poor countries.
"I find that freedom in the field of speculation has been turned into a political weapon to the extent that its gives power to one person, because he's rich, to force countries that are free to bow to his wishes," he said.
"We like the freedom to trade but if the freedom is abused to make the poor become poorer just because they're having a crusade, this is not good," Mahathir said.