‘Out of the box’ approach needed

New ways: Ringgit banknotes of various denominations are arranged for a photograph in Tokyo, Japan recently. Interest rate defence has had both success and failure, some quite spectacular.

In light of the recent ringgit weakness, a commonly used defence that is being proposed is to raise short-term interest rates sharply to deter speculation and weakness in the currency. Interest rate defence has had both success and failure, some quite spectacular.

Hong Kong raised its overnight interest rates to several hundred percent and successfully defended its currency in October 1997 against speculative attack.