KUALA LUMPUR, May 13 (IslamOnline & News Agencies) - Pressure to re-peg the Malaysian currency by devaluing it has prompted Malaysia's Prime Minister Mahathir Mohamad to warn local and foreign currency speculators here on Sunday.
The Malaysian Premier said the activities of some currency speculators who are buying large sums of U.S. dollars anticipating a devaluation of the Malaysian currency could damage the Malaysian economy.
"Although this is a way to make a profit, it is a very irresponsible act because what they are doing can damage our economy," he was quoted as saying by the Sunday Star newspaper.
Sources in Malaysia said a group of local currency speculators has been involved in the purchase of U.S. dollars in Malaysia at the discount rate of $1 for RM3.78. The fixed price is RM3.80 per U.S. dollar.
The idea of the group was to sell the accumulated U.S. dollars at the price of RM4.60 (said to be the new rate in case the Ringgit is re-pegged).
"The speculators hoped to make a large profit and to bring down the U.S. dollar on the international market altogether," IslamOnline was told.
Another source said the current rift between the Minister of Finance Daim Zainuddin and Mahathir is revolves around currency re-pegging.
Minister Daim has taken two months leave from his cabinet duties, arguing that he is concentrating on the huge number of development files on his desk.
The rift between the Malaysian leader and his "super" finance minister, credited with the recovery of Malaysia's economy after market crashes in the mid 1980s and in 1997, has deepened since then.
Mahathir reportedly said that his finance minister would do better to take a leave without pay from his work. The aging Prime Minister has been accused of bypassing Daim on several key economic issues.
Mahathir's reluctance to re-peg the ringgit amidst persistent speculations has distanced his finance minister from the cabinet, sources said in Kuala Lumpur.
The Premier said speculation on the re-pegging of the ringgit punished the local stock market in early April when it fell sharply. Malaysia has been praised for the pegging of the ringgit to the U.S. dollar since 1998.
Mahathir said speculators started spreading rumors a month ago that the ringgit would be re-pegged at 4.20 to the U.S. dollar, and said they hoped to make a quick profit, but that his government would not devalue the ringgit just for them.
"We know that this is happening but we will not devalue the ringgit just because speculators expect us to do it," he said.
He said the speculators were both locals and foreigners.
"It seems that they are waiting for our ringgit to be devalued, although the finance ministry and I have repeatedly said this will not happen," he added.
Mahathir said Malaysia would not submit to the pressure exerted by speculators to re-peg the ringgit based on its stronger value compared to the currencies of its neighbors because Malaysian products were still competitive.
There has been market speculation that the peg may be changed as regional currencies slump, making their exports more competitive in dollar terms.
