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Some Corrections On MYR & Bank Negara Strategy

My learned friend Hisham has rightly pointed out the "corrections" below:
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Blogger hishamh said...

'Under the government’s exchange rate regime, the exchange rate of the MYR is controlled against “a trade-weighted basket of currencies.”'

This is plain wrong - Malaysia has not followed a basket of currencies approach since before the 1997 crisis. It's also inconsistent with...

"The upward trend in the ringgit against the U.S. dollar and the revival of capital inflows into the equity market have increased central bank intervention in the FX market to support exports."

...which implies a different sort of currency regime entirely.

In any case, watch changes in reserves as a signal of intervention. If trade and capital inflows were attracting central bank intervention to absorb upward pressure on MYR, then you would expect an increase in international reserves...which isn't there. Taking into account revaluation loss from the MYR's appreciation, then change in reserves for the year to date (2010) is a big fat zero.

11:50 AM

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