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Malaysia rules out capital controls, currency peg as ringgit trades near 24-yr low

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Economy one hour ago (Sep 23, 2022 01: 51AM ET)

Malaysia rules out capital controls, currency peg as ringgit trades near 24-yr low Reuters. An over-all view of the Central Bank of Malaysia (Bank Negara Malaysia) in Kuala Lumpur, Malaysia, July 31, 2019. Picture taken July 31, 2019. REUTERS/Lim Huey Teng

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

The ringgit has dropped nearly 9% this season, consistent with a slide in other emerging market currencies, because the U.S. dollar has strengthened.

“Instead of resorting to capital controls or re-pegging of the ringgit, the policy priority now could be to sustain economic growth within an environment of price stability also to further strengthen domestic economic fundamentals through structural reforms,” Governor Nor Shamsiah Mohd Yunus said in a statement.

“This can give a more enduring support for the ringgit,” she added.

The central bank also said it’ll continue steadily to closely monitor and ensure orderly financial market conditions amid a stronger dollar.

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

In 1998, through the Asian financial meltdown, Malaysia had pegged the ringgit at 3.8 to the U.S. dollar and imposed capital controls. It had been eventually removed in 2005.

This week, Malaysia’s finance minister Tengku Zafrul Aziz also eliminated pegging the ringgit, saying this type of move will be very risky and bring about capital outflows.

Malaysia’s economy is gradually dealing with impacts of the pandemic, though global risks are set to weigh on future growth.

The economy grew at its fastest annual pace in per year in the next quarter, boosted by expansion in domestic demand and resilient exports.

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