MALAYSIA will not impose capital controls or peg the ringgit against the US dollar despite the currency trading at an all-time low against the greenback, Bank Negara Malaysia (BNM) said in a statement today.

This, the central bank said, will allow the country’s economy to remain open and the ringgit to be market-determined.

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

“This will provide a more enduring support for the ringgit.”

The central bank said it is monitoring the market conditions closely and that tighter global financial conditions and higher volatility in the foreign exchange markets are not expected to derail Malaysia’s economic growth.

It said Malaysia’s economy has also expanded 8.9% in the second quarter, backed by improvements in the labour market and tourism.

“Exports are underpinned by our highly diversified products and markets. The domestic financial system is well capitalised with ample liquidity, and financial intermediation continues to be supportive of the economy.”

The ringgit fell to 4.5670/5710 against the greenback from 4.5660/5695 at yesterday’s close.

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

This week, Malaysia’s Finance Minister Tengku Zafrul Abdul Aziz also ruled out pegging the ringgit, saying such a move would be very risky and result in capital outflows. – September 23, 2022.