KUALA LUMPUR: The view that Malaysia is a currency manipulator may be over-exaggerated, said economists.
Malaysia, Singapore and Vietnam are expected to remain in the US Treasury watch list when it released its latest report on foreign currency manipulators soon.
Twice a year, the Treasury publishes the “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States” report.
AmBank group chief economist and head of research Dr Anthony Dass said Malaysia does not practice currency manipulation.
“We support free and fair trade that has no place for unfair currency practices. Besides, with the ringgit exchange rate being market-determined, it is not a factor that we rely upon for exports competitiveness... Therefore, currency manipulator view may be over-exaggerated,” he said in a statement.
Even if Malaysia was being viewed as a currency manipulator by the US Treasury, under a 2015 law, Washington will need to spend a year to resolve the problem through negotiations, Dass added.
“Only if those talks fail, can the US take a number of small steps in retaliation, including stopping the US Overseas Private Investment Corp, a government development agency, from financing any program in Malaysia?”
Putra Business School business development manager Associate Professor Dr Ahmed Razman Abdul Latiff said once the US Treasury monitored Malaysia’s currency situation over a period of time, they would recognise that it is not a deliberate manipulation act.
“I also opine that the view of Malaysia being a currency manipulator is over-exaggerated. This is not new and the currency cannot be fully controlled or managed by Malaysian government or central bank alone.
“Many factors can affect the trade surplus and current account surplus especially considering that export and import activities from private sectors are very fluid and ever changing based on global market scenario,” he said.
Malaysia, Singapore and Vietnam had been included in the US Treasury’s monitoring list of potential currency manipulators in May.
They were among nine in the list, alongside China, Germany, Italy, Ireland, Japan and South Korea.
Out of the three criteria set by the US Treasury, Dass said Malaysia currently meets two as a currency manipulator.
The two criteria are that Malaysia’s trade surplus with the US had not changed much and its current account surplus had widened.
“The issue with regards to the persistent ‘one-sided’ intervention may not be serious. Looking at Bank Negara Malaysia, over the last few years it has been intervening in both directions of the foreign exchange market, not one-sided,” Dass said.
Bank Negara’s intervention was to ensure an orderly market and avoid excessive volatility of the exchange rate that can affect macroeconomic stability, he added.
As for the issue of the current account of the balance of payment, Dass said being a small and open economy, Malaysia was affected by both internal and external developments, including cyclical and structural factors.
Meanwhile, the ringgit hit a three-month high ahead of Bank Negara Malaysia’s decision to keep its key interest rate at 3.0 per cent today.
Analysts said the ringgit might also have benefitted from reports that the 10 Southeast Asian nations and five Asia Pacific countries had concluded the Regional Comprehensive Economic Partnership free trade deal.
At 6pm on Tuesday, the ringgit was quoted at 4.1290/1320 against the greenback from 4.1500/1540 at close on Monday.