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.