Malaysia central bank rules out pegging of ringgit

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Malaysia central bank rules out pegging of ringgit

KUALA LUMPUR Malaysia will not impose capital controls or peg the US dollar, as the currency trades near a 24 year low, the central bank said on Friday.

The ringgit has dropped nearly 9% this year, as the US dollar has strengthened, in line with a slide in other emerging market currencies.

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

She added that this will provide a more enduring support for the ringgit.

The central bank will continue to monitor and ensure orderly financial market conditions despite a stronger dollar, as stated by the central bank.

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.

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

This week, Malaysia's finance minister Tengku Zafrul Aziz ruled out pegging the ringgit, saying it would be very risky and resulted in capital outflows.

READ MORE: US Treasury: No major trading partner manipulates currency.

Malaysia's economy is slowly recovering from the impacts of the Pandemic, but global risks are set to weigh on future growth.

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