Malaysia has no plans for greenback peg, says finance minister

KUALA LUMPUR (Reuters) — Malaysia’s finance ministry stated on Tuesday it might implement structural insurance policies aimed toward boosting fund inflows and overseas funding that may assist the ringgit, reiterating it has no plans to peg the forex to the U.S. greenback.

The ringgit has fallen 5.4% to date this yr and on Tuesday was buying and selling at 4.6380 to the greenback, a recent seven-month low, and near its weakest ranges since January 1998.

In 1998, throughout the Asian monetary disaster, Malaysia imposed capital controls and pegged the ringgit at 3.8000 to the greenback, sustaining the peg till 2005.

It final yr stated it might not achieve this once more, citing the chance of capital outflows.

Malaysia risked dropping its financial coverage independence, and might have to extend its rates of interest to match excessive borrowing prices in america if it re-pegged the forex, Deputy Finance Minister Ahmad Maslan instructed the Senate on Tuesday.

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“The persons are already struggling [with the current interest rate level],” he stated.

Malaysia’s central financial institution, Financial institution Negara Malaysia (BNM), unexpectedly raised its benchmark rate of interest final month, citing a must handle persistent inflation amid sturdy home demand.

The federal government would as a substitute give attention to bettering Malaysia’s funding local weather and productiveness, in addition to implement fiscal sustainability measures that may appeal to high quality overseas funding, Ahmad stated.

BNM would additionally look to scale back volatility within the overseas alternate market, together with via using hedging devices, he stated.

The central financial institution stated this month Malaysia wanted structural reforms to strengthen progress prospects and encourage extra funding alternatives to spice up the ringgit.

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