All the local newspapers today carried this important newsbreak in finance on their front pages -- deservedly so. Malaysia's central bank, working likely in tandem with its China's counterpart, almost simulataneously last evening announced the de-pegging of the Ringgit to the US dollar (USD = RM3.8)imposed since September 1998.
The NST reported that Malaysia has replaced with immediate effect the Ringgit peg with a free float that will probably see the ringgit revalued at RM3.50-RM3.60 to the USD. (Meanwhile, China's yuan is expected to appreciate against the greenback by 2.1 percent, to 8.11 per US dollar, compred with 8.28 yuan to one USD before.)
While most media had predicted that China was planning the de-peg before the end of this year, its action yesterday was indeed a surprise by its timing, though the Malaysian action was more anticipated by its timeliness. Both countries' currencies have been seen as "under-valued" by most of their trade partners, especially Big Brother, the United States, who complained this was "unfair" in making the two countries' exports "cheaper".
Desiderata's thinking aloud: Let's see how Malaysia -- and China too -- compete in the international trade of goods and services. But with this "peg" removed, the trouble is that the "advanced" countries like the US will always find other "financial" loops in other countries to lasso. That's why the Marlboro cowboy image will always rule in the public consciousness when China joins the free market place. A case of You win some, You lose some more?
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