KUALA LUMPUR (REUTERS) - Malaysia sees no need to re-peg the ringgit to any other currency or impose capital controls in spite of its fall to 17-year lows, central bank governor Zeti Akhtar Aziz said on Thursday (Aug 13).
“I want to emphasize that we do not want to peg the currency,”Ms Zeti told reporters. “We’ve moved on from capital controls.”
The ringgit has fallen more than 12 per cent against the US dollar this year, making it the worst performing emerging Asian currency.
On Thursday, after Malaysia announced stronger-than-expected second quarter growth and Ms Zeti’s comment that there will be no capital controls, the ringgit briefly strengthened, reaching 3.9945 to the dollar from 4.000. But later, it slipped to 4.008.
The currency began to weaken in September 2014, when global prices of commodities fell. Between September and July, the country’s foreign-exchange reserves have fallen more than US$35 billion (S$48.8 billion) , to less than us$100 billion. “The ringgit is receiving additional pressure from declining commodity prices and domestic factors,” Ms Zeti said.
However, the central bank maintained that the “impact of ringgit depreciation is manageable” and that the “economy will remain resilient in the face of a challenging environment”.
Markets have been concerned that Bank Negara Malaysia (BNM) might consider imposing capital controls following the rapid depletion of reserves and the ringgit breaching 4.00 against the dollar.
In 1998, during the Asian financial crisis, then-Prime Minister Mahathir Mohamad imposed capital controls and pegged the plunging ringgit at 3.80 to the dollar. The controls were lifted in 2005.
Asked whether Malaysia might again impose controls, Ms Zeti said that the country has “a more developed financial system and markets that are larger and able to absorb volatility”.
On July 30, BNM denied rumours that Ms Zeti had stepped down as governor. On Thursday, she said will complete her full term, which ends in May 2016. Ms Zeti became governor in 2000.