Malaysia rules out capital controls and currency peg as ringgit trades near 24-year low

KUALA LUMPUR (Reuters) – Malaysia will not impose capital controls or peg the ringgit to the U.S. dollar, the central bank said on Friday, as the currency trades near a 24-year low.

The ringgit has fallen nearly 9% this year, in line with a decline in other emerging market currencies, as the US dollar has strengthened.

“Rather than resorting to capital controls or re-anchoring the ringgit, the policy priority now is to support economic growth in an environment of price stability and further strengthen domestic economic fundamentals through structural reforms,” ​​the official said. Governor Nor Shamsiah Mohd Yunus in a statement. statement.

“This will provide more lasting support for ringgit,” she added.

The central bank also said it would continue to closely monitor and ensure orderly conditions in financial markets amid a stronger dollar.

The ringgit traded at 4.568 to the dollar on Friday. It had fallen to 4.569 on Thursday, its lowest since January 1998.

In 1998, during the Asian financial crisis, Malaysia fixed the ringgit at 3.8 to the US dollar and imposed capital controls. It was finally removed in 2005.

This week, Malaysian Finance Minister Tengku Zafrul Aziz also ruled out pegging the ringgit, saying such a move would be very risky and lead to capital outflows.

The Malaysian economy is gradually recovering from the effects of the pandemic, although global risks are expected to weigh on future growth.

The economy grew at its fastest annual pace in a year in the second quarter, boosted by expanding domestic demand and resilient exports.

(Reporting by A. Ananthalakshmi; Editing by Martin Petty)

Copyright 2022 Thomson Reuters.

James V. Hayes