Malaysian PM deepens crisis

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The Independent Online
The Malaysian currency, the ringgitt, suffered further big losses on the international money markets yesterday, after the country's Prime Minister Mahathir Mohamed, renewed his call for a ban on all currency trading.

His remarks, made during a trade conference in Chile, not only saw the ringgitt drop to its lowest-ever level, but also helped fuel a renewed battering of seveal South-east Asian currencies.

Malaysian businessmen probably breathed a sigh of relief when the Prime Minister left for Chile earlier in the week. He has earned notoriety for his rash criticism of "currency speculators". Although his threats of legal action against traders who have profited from the ringgitt's slide have been taken seriously by few, they have been enough to erode confidence in an economy at a time when it most needs it.

Addressing a conference of trade officials and businessmen, during a visit to Chile, Dr Mathatir initially lambasted the international media for "obscenely gloating at the economic problems facing Malaysia and other countries in Asia. But he could hardly resist raising the more sensitive issue of currency traders as well. "Their activities," he told delegates, "deny freedom to others. We therefore need to regulate or outlaw currency trading, so free trade can flourish."

The markets, wary of any moves by the Malaysian government to curb their activities, acted swiftly. In just two hours, the ringgitt had plunged more than 4 per cent to reach a record low of 3.4080 to the dollar. At the end of the day's trading it had regained only a fraction of its lost ground, closing at 3.3540.

Stocks on the Kuala Lumpur exchange were also hit hard. The key index fell more than 2 per cent, compounding the significant losses of the past few months.

"The markets are already jittery about the Malaysian economy," said one Kuala Lumpur-based trader, "but remarks like the Prime Minister's help no one. They only breed nervousness."

Yesterday's trading also saw other regional currencies under heavy pressure. The Indonesian rupiah hit a new low against the dollar, while the Philippines Central Bank was forced to intervene to bolster its currency, the peso.