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Malaysian Prime Minister Najib Razak said Thursday that despite the rapid depreciation of ringgit against the greenback in recent months, his government will not impose capital control or peg the ringgit to the U.S. dollar as the country's economic foundation remains sound.
The ringgit closed at 4.135 against the U.S. dollar on Thursday, 0.75 percent lower compared to the previous day.
Najib said his government believes that the current level of the ringgit does not reflect the Malaysian economy, though the adjustments facing the global economy and financial markets would have some impacts on the domestic financial market and exchange rate.
"Therefore, the government of Malaysia will not move to a pegged exchange rate regime nor will it impose capital controls," he told a press conference.
Malaysian pegged is currency to the U.S. dollars during the 1997 financial crisis that hit Southeast Asian countries.
Najib have talked to local and foreign economists and analysts to hear their evaluation on the Malaysian economy. He said he was told that the ringgit should be higher than its current level against the U.S. dollars.
Najib's brother Nazir Razak, who heads Malaysia's second largest bank CIMB, said the ringgit should be trading at about 3. 70 to the U.S. dollar based on current fundamentals, but investor sentiment has derailed the local currency beyond that level, according to state news agency Bernama.
Malaysia's economy growth slowed to 4.9 percent in the second quarter, but still beat the predictions of some analysts.
When announcing the growth figure last week, Malaysia's central bank governor Zeti Akhtar Aziz also said there is no plan to peg the ringgit to any other currency.
