Malaysia rules out ringgit peg

PM Najib said Thursday that the current level of the ringgit does not reflect the country's economic fundamentals.

However, he ruled out any government intervention in the form of capital controls or a currency peg saying that "the flexibility of our exchange rate is important to absorb global adjustments and volatility."

Najib, who is also finance minister, said Malaysia has become more integrated in the global financial market given the openness of its trade and financial market.

The ringgit, Asia's worst performer this year with losses exceeding 17 percent against the dollar, was steady on Thursday after the comments and found some respite as China's yuan rallied.

Najib has faced severe criticism over the past several months for his alleged role in a scandal over indebted state fund 1Malaysia Development Berhad (1MDB), which is being investigated for allegations of corruption and financial mismanagement. The 62-year-old PM is the chairman of the fund's advisory board.

Falling reserves

Meanwhile, the Malaysian economy has suffered from weak global commodity prices and falling domestic consumption.

Separately, Malaysian central bank Governor Zeti Akhtar Aziz said foreign exchange reserves had fallen but it was not a cause for worry.

"We've seen it decrease before and there's no issue to be concerned because that's what the reserves are there for, to represent a buffer to adjust during such periods," she told reporters.

Malaysia's international reserves fell below the $100-billion (89.9-billion-euro) mark as of July 31, triggering doubts about the Southeast Asian nation's ability to defend its currency.

sri/hg (Reuters, Bernama)