KUALA LUMPUR -(Dow Jones)- Any move to re-peg the ringgit against the U.S. dollarwill hurt the Malaysian economy, economists said Monday in response to a senior government official's suggestion that the idea should be considered.
If implemented, the move would be a step backward, not least because it would hurt the country's export competitiveness, add to policy uncertainty and have an impact on investment sentiment, they said.
The Star daily quoted International Trade and Industry minister Muhyiddin Yasin as saying Sunday that the government should study a recent proposal by former premier Mahathir Mohamad to re-peg the ringgit. Muhyiddin said several mechanisms used in the previous peg could be used again.
The Malaysian government has made no comment, but newly appointed Finance Minister Najib Razak is expected to address the issue at a press conference scheduled for midday local time Monday.
The Mahathir administration had pegged the ringgit at 3.80 against the U.S. dollar to halt the rapid decline of the Malaysian currency at the height of the Asian financial crisis in September 1998. The peg was removed in July 2005, and the currency has been trading in a "managed float" since.
The U.S. dollar, which bought MYR3.3100 at end of last year, now buys MYR 3.4160.
Although economists say a re-peg may be unlikely, any suggestion that the government was considering such a move will have a negative impact on Malaysia.
"If the Malaysian government does decide to re-peg or even consider repegging the ringgit so soon after the de-pegging in 2005, it'll be a step backward...this is not the time to have an overly strong ringgit, and it will harm export competitiveness," said an economist with a foreign bank-backed brokerage who did not want to be named.
"Re-pegging the ringgit, at whatever level, will only disrupt business process and create a very negative perception towards Malaysia's policymakers," said an economist with a local brokerage, speaking on condition of anonymity. "The circumstances in 1998 are very different to the ones we are facing today."
JP Morgan said in report that such a move would be unlikely due to "fractures within the current administration" and an apparent lack of consensus within the current leadership.
Aseambankers said that in addition to political uncertainty, the likelihood of a re-peg was a new "risk factor" for investors in Malaysia to worry about. "The call is likely to create policy uncertainty and risk that could unsettle the local financial markets," it said.
The Malaysian stock market could also be a victim if a re-peg happens. "Market reaction is likely to be negative as any restriction on the currency is likely to result in further capitulation of foreign funds," said a dealer.
1 comment:
Today is Sept 23, the day of reckoning. Or the day that will pass by and nothing happens. As I write this, we see West Malaysia is in a state of haywire and amazingly all eyes are suddenly on us in the East now. The politicians here are now being looked upon as the KingMakers to decide the fate of the nation. As we muddled through 2008, the state of chaos has resulted a deeper economic hardship to us. While you politicians are fighting each other for political dominance, we the rakyat, are suffering. And yet, you guys still doesn’t sit down and asked of what we really want. Instead, you continue to create issues that are degenerating our nation into mayhem.
Let us tell you that we, the People of the East want this chaotic situation to end. When we became part of Malaysia in 1963, there was a consensus under the Cobbold Commission. It gave each and every one of us the opportunity to show our preference. Now, what we want is a consensus again to determine to whom our allegiance are. Politicians may said they have the support from the people, but do they? All, in all we are the ones suffering from this debacle.
Read more here:
http://ngapsayot.wordpress.com/
Post a Comment