Malaysian economy will suffer with re-pegging of Ringgit
Reacting to the government official’s proposal on Monday, the economists were of the view if any move is made to re-peg the Ringgit against the American dollar the Malaysian economy will have to suffer. The economists also added that if this got applied it would hurt the country’s export strength, it will also be affecting the investments, and it will also adjoin the factor of insecurity of the policies.
International Trade and Industry minister Muhyiddin Yasin was quoted by The Star Daily that a latest suggestion by the previous premier Mahathir Mohamad to re-peg the Ringgit should be reviewed. Mr. Yasin was of the view that all those mechanisms those were put into use in the earlier peg could be put into use again. Recently appointed Finance Minister Mr. Najib Razak will probably address a press meeting that was listed for midday local time Monday, but there was no statement made by the government of Malaysia.
The Ringgit was pegged at 3.79 by Mr. Mohamad’s management against American dollar to cut short the crashing currency of Malaysia. The peg was eliminated in the month of July 2005 and as far as the currency is concerned it has been trading in a ‘managed float’ ever since. At the last years end American dollar which purchased MYR3.399 now purchases MYR3.4159.
Though the economists were of the view that re-peg might be improbable, any proposal that the government was thinking of taking such a step will only be bringing a negative impact on Malaysia. According to an economist with a foreign bank-backed brokerage who wanted to keep his identity secret, in any case the government of Malaysia takes a decision to re-peg the Ringgit almost immediately after the de-pegging in the year 2005 will simply mean that they are themselves taking a step backward. He also added that at this point of time there is no need to have an excessively strong Ringgit as it will only affect the export spirits.
Giving his view on secrecy, an economist with a brokerage was of the view that re-pegging of Ringgit at any stage will only mean disturbing the whole practice of trading and generating a negative opinion for the officials of Malaysia. The present situation is totally different like it used to be in the year 1998. In a report JP Morgan was of the view that due to the break ups amongst the present management this move would be improbable and an obvious absence of consensus inside the current management.
The investors now had to face a new problem of re-pegging along with the political uncertainty and this will also disturb the local financial markets. A dealer was of the view that the stock market will also become a victim of re-pegging. The market response will probably be negative as with any limitations on the currency will only result in surrendering of the foreign funds.