from Straits Times to my good brudders, if u cheong regularly, can consider changing ur speare cash now, just in case.
Jan 24, 2005
Observers bet RM peg will move soon
KUALA LUMPUR - SPECULATORS are betting that Malaysia will bow to growing pressure to review its currency peg to the shrinking US dollar.
Many analysts not only believe they are right but also insist that the government should make a change soon.
Foreign cash has been pouring into Malaysia, hiking its foreign reserves by 19 per cent or US$10.7 billion (S$17.6 billion) in the fourth quarter of last year alone, Barclays Capital wrote in a research paper last Friday.
Comments by econo mists and even the man who imposed the peg - former premier Mahathir Mohamad - that the time is right for change 'are likely to accelerate such speculative inflows', Barclays Capital said.
It forecast a change in the pegged rate of 3.8 to the dollar - in place since 1998 - around the middle of the year, while some economists have urged more immediate action.
Prime Minister Abdullah Ahmad Badawi responded to Tun Dr Mahathir's call last week by saying no change would be made at the moment, but signalled that the government is ready to be flexible. 'If there comes a time when changes are required to be made for the benefit of the people, we would consider making the changes then,' said Datuk Seri Abdullah, who is also Finance Minister.
Adding to the pressure on the government, local think-tank Malaysian Institute of Economic Research said last week that the 'window of opportunity' for change from a position of strength was shrinking.
It has warned that a failure to act soon could lead to a highly disruptive ringgit correction.
Perhaps the most notable push for a review came from Dr Mahathir, who defied International Monetary Fund (IMF) prescriptions to peg the ringgit to the dollar and impose capital controls during the Asian financial crisis.
The IMF later acknowledged that his action had helped Malaysia weather the storm better than many neighbouring countries. But the former premier said the sharp decline in the dollar's value meant it was now costlier for Malaysia to import products from Japan, Europe and elsewhere.
Estimates of the ringgit's fair value by banks and research houses range from 3.3 to 3.6 to the dollar, rather than the currently pegged 3.8.
With many economists believing change is inevitable, attention has focused on what form the change will take, with many seeing a re-peg to the dollar at an appreciated value or a managed float against a basket of currencies as more likely than a free float.
Speculation that China may adjust its own currency peg to the dollar and allow the yuan to rise has lent strength to the belief that Malaysia may follow suit, but Barclays Capital said any action was more likely to be driven by Malaysia's own priorities. \-- AGENCE FRANCE-PRESSE