Ringgit and baht hit new lows on Mahathir remarks
Ringgit and baht hit new lows on Mahathir remarks
SINGAPORE (AFP): The Malaysian ringgit and the Thai baht hit record lows yesterday after Malaysian Prime Minister Mahathir Mohamad's call for curbs on foreign exchange trading set off a scare in regional markets.
The ringgit closed at the psychological 3.1000 to the dollar level in Asian trading, from 3.0225 last Friday, while the Thai baht ended at 36.30 offshore from 35.75. Other regional currencies were infected by the ringgit's weakness.
"It was very volatile and very uncertain all day," moaned a forex dealer with a European bank.
Stock markets were likewise jarred by Mahathir's remarks despite attempts by his deputy and finance minister Anwar Ibrahim to contain the damage by saying there were no plans to change Malaysia's foreign exchange trading rules.
The lack of encouraging news from the global financial talks in Hong Kong also whittled away at confidence in Southeast Asian currencies, which have all plunged since the de facto devaluation of the Thai baht on July 2.
Apart from weakness generated by the ringgit, the baht, which hit a low of about 36.40, was also hit by uncertainty ahead of a no-confidence vote on Thai Premier Chaowalit Yongchaiyudh.
The Indonesian rupiah closed at 3,020 from 2,980, largely as a result of the dreaded "contagion effect" in the region.
"The ringgit ruined the day," said Maya Pinto, regional economist with British financial house I.D.E.A. "It dragged all the other regionals weaker."
The ringgit also crossed the sensitive two-on-one level against the Singapore dollar Monday.
Mahathir proposed a ban on currency trading in a speech Saturday in Hong Kong, calling it an "unnecessary, unproductive and totally immoral" activity.
The regional market, shaken by turmoil since early July, had been hoping to get some solace from the ongoing annual meetings of the International Monetary Fund (IMF) and World Bank (WB) in Hong Kong.
But no concrete measures have emerged so far and Mahathir's comments on the sidelines of the Hong Kong financial jamboree spooked traders Monday.
His deputy Anwar Ibrahim, who is the finance minister, swiftly stepped in to repair the damage, saying in Hong Kong on Sunday that there was "absolutely no change" in the rules and regulations on foreign exchange trading in Malaysia.
The Singapore dollar closed at 1.5270 from 1.5178 on Friday following the weekend release of lower-than-expected growth figures for crucial non-oil domestic exports, which rose 5.5 percent in August from a year ago.
The Philippine peso was the exception in the region, opening strongly after a massive protest in Manila on Sunday was defused by President Fidel Ramos's categorical vow to step down in 1998. It closed at 33.34 to the dollar, hardly changed from 33.33 on Friday.
The Philippine peso was the exception in the region, opening strongly after a massive protest in Manila on Sunday was defused by President Fidel Ramos's categorical vow to step down in 1998. It closed at 33.34 to the dollar, hardly changed from 33.33 on Friday.
Analysts said the ringgit would have fallen more sharply if Deputy Premier Anwar Ibrahim, who is also finance minister, had not tried to clear the air over Malaysia's foreign exchange policies.
Anwar has canceled a scheduled U.S. visit to deal with "pressing issues" at home, apparently referring to the currency crisis. He was due to address a UN General Assembly meeting Wednesday in New York.
"If Anwar did not come out to reassure investors that the policies will not be changed for now, it would have been worse," said Alison Seng, analyst at research house Standard and Poor's MMS.
U.S. billionaire financier George Soros, who has been blamed by Mahathir for allegedly leading attacks on the ringgit, lashed out at the Malaysian leader over the weekend.
"Dr. Mahathir is a menace to his own country," Soros told a World Bank seminar in Hong Kong on Sunday, calling the Malaysian leader a "loose cannon."