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Thursday July 21, 2005

Bank Negara statement on ringgit float

BANK Negara Malaysia announces Thursday that the exchange rate of the ringgit with immediate effect will be allowed to operate in a managed float, with its value being determined by economic fundamentals. Bank Negara Malaysia will monitor the exchange rate against a currency basket to ensure that the exchange rate remains close to its fair value. Promoting stability of the exchange rate continues to be a primary objective of policy. 

Changes in the international and regional financial and economic environment have made it important for Malaysia to have a stable exchange rate against its major trading partners, in particular, the regional countries. 

Consequently, the stability of the ringgit exchange rate against the regional currencies will become increasingly important.  

Such stability can best be achieved by maintaining the value of the ringgit against a trade-weighted index of Malaysia’s major trading partners. 

This announcement represents a change in the system by which the value of the ringgit is determined.  

Given that the current valuation of the ringgit is consistent with our fundamentals and after taking into consideration developments in our trading partner countries, the exchange rate after shifting to this new system is not expected to deviate significantly from the current prevailing level.  

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