ID :
20645
Tue, 09/23/2008 - 11:02
Auther :
Shortlink :
http://m.oananews.org//node/20645
The shortlink copeid
FLOATING EXCHANGE RATE PROVIDES FLEXIBILITY TO ADJUST TO INT'L ECONOMIC
KUALA LUMPUR, Sept 22 (Bernama) -- The floating exchange rate regime provides Malaysia with the flexibility to adjust to international economic and financial developments, Bank Negara Governor Dr Zeti Akhtar Aziz said Monday.
"The regime also accords exchange rate stability against our main trading
partners. What is needed now is stability, not rigidity.
"A fixed exchange does not eliminate volatility. It merely transfers the
volatility to domestic prices such as asset prices and inflation.
"Therefore, a re-pegging of the ringgit has never been a
consideration.
"The ringgit will continue to operate under a managed float regime with its
value being determined by the market," she said when responding to questions on
a suggestion by former Prime Minister Tun Dr Mahathir Mohamad that the Malaysian
currency's exchange rate should be fixed again to cushion the impact of the
weakening dollar against other currencies.
Dr Zeti said the central bank operations will continue to aim at ensuring
orderly market conditions, in particular, to deal with excessive disruptions to
the market.
Going forward, she said, it is expected that this underlying trend would
continue.
Since the unpegging of the ringgit in 2005, Dr Zeti said it has been on a
gradual appreciating trend, reflecting the fundamentals of the economy.
The ringgit was pegged at RM3.80 to the greenback in September 1998 to
cushion it against rogue currency speculators during the 1997/98 Asian financial
crisis which in the process insulated the economy.
Before the crisis, which began with the attack on the Thai baht in July
1997, the ringgit was trading at a high of RM2.42 but fell sharply versus the
dollar following excessive speculation.
It depreciated to RM5.20 at one time in 1998, prompting the government
to impose capital controls and peg the ringgit.
"The regime also accords exchange rate stability against our main trading
partners. What is needed now is stability, not rigidity.
"A fixed exchange does not eliminate volatility. It merely transfers the
volatility to domestic prices such as asset prices and inflation.
"Therefore, a re-pegging of the ringgit has never been a
consideration.
"The ringgit will continue to operate under a managed float regime with its
value being determined by the market," she said when responding to questions on
a suggestion by former Prime Minister Tun Dr Mahathir Mohamad that the Malaysian
currency's exchange rate should be fixed again to cushion the impact of the
weakening dollar against other currencies.
Dr Zeti said the central bank operations will continue to aim at ensuring
orderly market conditions, in particular, to deal with excessive disruptions to
the market.
Going forward, she said, it is expected that this underlying trend would
continue.
Since the unpegging of the ringgit in 2005, Dr Zeti said it has been on a
gradual appreciating trend, reflecting the fundamentals of the economy.
The ringgit was pegged at RM3.80 to the greenback in September 1998 to
cushion it against rogue currency speculators during the 1997/98 Asian financial
crisis which in the process insulated the economy.
Before the crisis, which began with the attack on the Thai baht in July
1997, the ringgit was trading at a high of RM2.42 but fell sharply versus the
dollar following excessive speculation.
It depreciated to RM5.20 at one time in 1998, prompting the government
to impose capital controls and peg the ringgit.
