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Will the ringgit hit US$4.20?
By Asia Newspaper
7/4/2001 11:31 am Sat
[Ramai analis berpendapat ringgit sepatutnya bernilai
sekitar RM 4.20 untuk setiap dolar Amerika jika tidak ekspot
Malaysia akan semakin merana kerana nilai matawang serantau
lemah belaka. Mereka berpendapat Mahathir dan Daim ada memberi
beberapa petanda dalam ucapan mereka bahawa ringgit akan dinilai
semula walaupun Mahathir kerap menidakkannya.
Tetapi kemungkinan pilihanraya DUN Berserah dan perhimpunan agung
Umno yang semakin hampir tiba menyebabkan Mahathir tidak mengubah
nilai ringgit kerana itu menggambarkan betapa lemahnya beliau.
Ringkasnya Mahathir sedang terperangkap oleh egonya sehingga ia
menjerut dirinya juga. Jika BSKL tidak sihat-sihat juga sehingga
pemilihan agung Umno - Mahathir akan tertendang dengan aibnya.
Khabar angin memang merbahaya - BSKL meragam teruk sehingga jatuh
38.91 mata atau sebanyak 6.1% kepada 594.26 dalam satu hari sahaja.
Punca masalahnya Mahathir juga kerana dia sering menterbalikkan apa
yang dikata serta-merta dan sering samar berbicara sehingga resah
pelabur dibuatnya dan terpaksa asyik hidup dalam meneka.....
Will the ringgit hit US$4.20?
Apr 5, 2001
HOW much longer can the ringgit stay pegged to the US dollar at RM3.80
($1.81)? That is the question swirling around boardrooms and the KL Stock
The RM3.80-US$1 exchange rate was fixed on Sept 2, 1998. The peg was
introduced to ward off speculative raids on the currency during a time of
Now, many businessmen and bankers in Malaysia feel the ringgit is
overvalued, reports The Business Times. The country's falling foreign
currency reserves - on which the peg is based - plus a falling yen, a
stronger US dollar, and a weakening US economy have all put downward
pressure on Asian currencies.
BT reports that many businessmen are now saying the range should be between
RM4 and RM4.20 to the US dollar.
With the pegged ringgit overvalued against other regional currencies (the
Sing dollar has fallen six per cent against the US dollar in the past week),
Malaysian goods will be priced uncompetitively.
The devaluation camp is reading a lot into recent remarks by Prime Minister
Mahathir Mohamad and his finance minister.
On March 26, Dr Mahathir said the government would not be swayed by
short-term currency market movements.
He said: "At this point of time, we don't see any necessity to change (the
peg) because we are fairly efficient, and even if the ringgit is more
costly, we are still competitive."
Last Tuesday, Dr Mahathir reaffirmed his no-change stand. But he also didn't
rule out a review at some point. That would come, he said, if the regional
currencies continued to depreciate by 20 per cent.
This week, he restated his no-change stand. "At the moment, we don't see any
reason why we should change our present system," he said. But many will sure
ponder: At the moment?
Around the same time, Finance Minister Daim Zainuddin was also reported to
have hinted at a possible realignment of the ringgit peg. The report was
quickly denied by Malaysian officials, who said it would not make sense for
the government to tell the market beforehand. But there's no smoke without
fire, said market watchers, pointing to Tun Daim's hints.
If the finance minister is inclined towards a devaluation, analysts say, the
prime minister may eventually agree with him.
But Dr Mahathir, facing a Pahang by-election and upcoming Umno party
elections in June, will not unpeg the ringgit if that act makes him look
Meanwhile, the Malaysian stock market took a severe beating yesterday on
renewed fears of the devaluation of the ringgit.
The Kuala Lumpur Stock Exchange Composite Index (KLCI) yesterday tumbled
38.91 points or a hefty 6.1 per cent to 594.26 points.
GLOBAL market weakness dragged Asian currencies lower yesterday.
A heap of negative factors, ranging from a weaker yen, slowing exports to
the US, falling stock prices and a growing diplomatic dispute between China
and the US all contributed to the weakness, currency traders and economists
The US dollar remained Asian investors' preferred currency.
Only the Singapore dollar bucked the losing trend, closing at $1.816 to the
The yen traded at around 125.80, down slightly from 125.6 on Tuesday.
It has lost around 10 per cent of its value since the start of the year.
The Thai baht hit a fresh 37-month low of 45.465 to the US dollar.
The greenback gained 1.4 per cent to 10,595 Indonesian rupiah.
- Wire services.
The Business Times, Singapore
6th April 2001
Testing times ahead for Malaysian ringgit peg
The clamour for a change in Malaysia's fixed exchange rate is growing
louder as regional currencies sink and recent dives in the share
market are sending a message to the government that patience is
waning. But its future is tied up as much in politics as economics --
the peg was part of Prime Minister Mahathir Mohamad's defiant policy
to avoid the perceived humiliation of an imposed Western aid package
as the Asian crisis savaged regional economies.
This year the ringgit has gone from being cheap to slightly overvalued
and, as the falling yen pulls other Asian currencies down, it is
starting to look expensive and put strains on Malaysia's
Recount: as the falling yen pulls other Asian currencies down, the
ringgit is starting to look expensive and is putting strains on
Malaysia's export-oriented economy
There is no immediate pressure on Dr Mahathir to adjust the peg, but
growing speculation that he will have to act sometime is manifest in a
Kuala Lumpur Stock Exchange index which lost over 6 per cent on
Wednesday and was down again yesterday.
It has now fallen around 15 per cent since the start of the year,
putting it among the worst performing markets so far in 2001 along
with Hongkong and Jakarta. Political bravura will underpin Malaysia's
resolve to stand by its RM3.80 per dollar exchange rate peg when
economic forces bring pressure to bear. Dr Mahathir sacked his deputy
and finance minister Anwar Ibrahim in September 1998, fixed the peg
and slapped on currency controls as a means of rescuing the economy,
even as Thailand, Indonesia and South Korea turned to the
International Monetary Fund.
And Malaysia has bounced back more strongly from the Asian crisis than
those countries which signed up for the IMF's free-float
prescriptions, which Anwar was also willing to take. Malaysia's two
big risk factors, foreign fund managers say, are the issue of who
takes over when 75-year-old Dr Mahathir finally moves aside, and the
sustainability of the ringgit peg.
On Wednesday, Dr Mahathir said there was no need for a change, after a
Chinese business group proposed the authorities move to a "crawling
peg" or fluctuation band system. The same day the share market struck
a two-year low, partly due to currency worries. "The ringgit is
slightly, not grossly overvalued, and the odds that the peg will break
are less than even, in our opinion," Citibank Salomon Smith Barney
said in a report on Wednesday.
Last week central Bank Negara said, based on the real effective
exchange rate index, which measures a currency's value based on
inflation differentials with major trading partners, the ringgit was
now almost at its equilibrium value.
That could be underselling the ringgit -- Citibank Salomon prefers to
use the competitive real trade weighted exchange rate index, which
shows the currency is overvalued by around 7 per cent versus its
September-October 1998 level. "It is critical that the trade surplus
stays large enough to sustain public confidence in the ringgit peg,"
Citibank said in a recent report, noting that additional fiscal
spending could continue to draw in imports.
Malaysia, constrained by the potential conflict between the peg and a
looser monetary setting, may have to adopt an even more expansionary
fiscal policy, it added. "We believe policymakers will probably try to
exhaust the fiscal options, leaving a ringgit re-peg as a last
resort," Citibank said. -- Reuters, AFX-Asia