Malaysia will not adjust its currency peg of 3.80 ringgit to the dollar for the time being but is closely watching developments in the capital market, Prime Minister Abdullah Ahmad Badawi said. Many people do not like Malaysia having the peg but it is more important for Malaysia to have a stable currency, Abdullah said in a report from Amsterdam carried by the national news agency Bernama. Ansewering a question on whether the government would change the peg, Abdullah said: "Today, stability in the market place is so important because you want to be able to predict about your money and how much one is going to get. "However, nothing is cast in stone and we are watching developments very closely."
Abdullah said the government has prepared a number of scenarios on the movement of certain currencies so Malaysia will be able to adjust to any sudden development. "We don't want to be caught unprepared and we refuse to be caught unprepared," he said.
Abdullah said Malaysia was unprepared for the 1997 Asian financial crisis but now the government would give top priority to the stability of the ringgit at all times.
Former prime minister Mahathir Mohamad, who controversially pegged the ringgit to the dollar and imposed capital controls in 1998 to insulate the country from the fallout of the crisis, has joined a growing chorus of calls for a review of the peg. He said sharp declines in the value of the dollar meant Malaysia's imports were now costlier.
Speculation that China may adjust its own currency peg to the dollar and allow the yuan to rise has also lent strength to the belief that Malaysia might follow suit. The government has previously said it would review the peg if there were to be a swing of 20 percent either way in regional currencies against the dollar.
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