Ringgit won't be allowed back into currency market

Ringgit won't be allowed back into currency market

May 07, 2008
The Star

THE ringgit will no longer be allowed to be borrowed or traded in the currency market to prevent a recurrence of the 1997-1998 financial crisis, the House heard.

Second Finance Minister Tan Sri Nor Mohamed Yakcop said the Asian crisis, which also affected Malaysia then, occurred when currency and hedge fund traders borrowed large amounts of ringgit to be traded in the market.

He said the system involved the borrowing and selling of the ringgit made through large funding loans from US-based banks.

Those involved in hedge funds, for example, could get up to US$20 for every US$1 borrowed to trade the ringgit.

"This means that at that time, hedge funds or currency speculators could use the loans, reaching up to US$20bil, to attack the ringgit. That's exactly what had happened in 1997 and 1998," Nor Mohamed said.

Nor Mohamed said that when the financial crisis hit Malaysia the Government implemented a simple and unorthodox course by blocking the trading of the ringgit.

"The ringgit will not be allowed to be borrowed or sold by currency traders, and this financial regime will remain in place at all times," he told Ahmad Maslan (BN-Pontian).

It was reported that the ringgit reached RM3.131 per US dollar on April 23, the highest since it was de-pegged from the greenback in 2005.

Earlier, Nor Mohamed told Fong Kui Lun (DAP-Bukit Bintang) that it was important to ensure that the ringgit exchange rate was not volatile to create a stable business environment for local exporters.