Malaysia's finance ministry said on Tuesday it would implement structural policies aimed at boosting fund inflows and foreign investment that can support the ringgit, reiterating it has no plans to peg the currency to the U.S. dollar.
The ringgit has fallen 5.4% so far this year and on Tuesday was trading at 4.6380 to the dollar, a fresh seven-month low, and close to its weakest levels since January 1998.
In 1998, during the Asian financial crisis, Malaysia imposed capital controls and pegged the ringgit at 3.8000 to the dollar, maintaining the peg until 2005.
It last year said it would not do so again, citing the risk of capital outflows.
Malaysia risked losing its monetary policy independence, and may need to increase its interest rates to match high borrowing costs in the United States if it re-pegged the currency, Deputy Finance Minister Ahmad Maslan told the Senate on Tuesday
"The people are already struggling [with the current interest rate level]," he said.
Malaysia's central bank, Bank Negara Malaysia (BNM), unexpectedly raised its benchmark interest rate last month, citing a need to manage persistent inflation amid robust domestic demand.
The government would instead focus on improving Malaysia's investment climate and productivity, as well as implement fiscal sustainability measures that can attract quality foreign investment, Ahmad said.
BNM would also look to reduce volatility in the foreign exchange market, including through the use of hedging instruments, he said.
The central bank said this month Malaysia needed structural reforms to strengthen growth prospects and encourage more investment opportunities to boost the ringgit.
Source: Nikkei Asia
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<p>Time: 2024 By: Ministry of Industry and Trade</p>
