Dr M sees ringgit fair value at 3.8, akin to '98 currency peg

Dr Mahathir Mohamad has placed the current ringgit fair value at 3.8, about 5 percent stronger than its current rate against the dollar and similar to the peg he placed back in 1998 during the Asian financial crisis and during his first stint as prime minister.

According to Bloomberg, the currency climbed a further 0.3 percent after it published the latter saying so following his interview with them today.

Fair value refers to the estimated market value set for a good, service, asset or liability, which in this case, refers to the value of the ringgit.

"We would like to strengthen our ringgit but it should be done naturally," Mahathir was quoted saying today, without elaboration.

He blamed the current slump in the ringgit to the stresses being faced by most emerging markets in the regions, citing an appreciating dollar as well as concerns over the looming US-China trade war.

“This is actually the problem arising from the state of the world’s economy, not just ours,” he said.

Even so, many quarters, including former prime minister Najib Abdul Razak, had blamed the government exposes on alleged financial scandals related to the Najib-linked state investment 1MDB fund, which is currently being investigated, as a major culprit for the weakened currency.

This, coupled with the announcement that the country, fresh from changing to a new government after more than 60 years under BN, was faced with an accumulative debt and liabilities of RM1 trillion, had spooked investors and causing many to pull out, they claimed.

Najib said 'no'

Stocks at Bursa Malaysia has tumbled in the weeks following but according to Bloomberg, strategists have predicted a slow appreciation over time with a Bloomberg survey giving a median estimate for the ringgit at 3.95 by year-end.

The ringgit was trading at 4.00 against the greenback today.

The pegging of the ringgit to the US dollar was carried out by Mahathir 20 years ago, in a move that was chastised by the International Monetary Fund (IMF) at the time but which many later credited for steering Malaysia out of the Asian financial slump.

The peg to the greenback was lifted in 2005. Former prime minister Najib Abdul Razak had also criticised the move, saying he would never peg the ringgit as he claimed it lowered the confidence on international investors on Malaysia. - Mkini