Malaysia considers allowing ringgit to trade offshore

KUALA LUMPUR, Sept 12, 2010 (AFP) - Malaysian premier Najib Razak said his government may consider allowing the ringgit to trade offshore, 12 years after it was stopped amid the Asian financial crisis, according to reports Sunday.

"We are open to it," Najib said in an interview with financial television channel CNBC, which carried the transcript on its website.

"We are quite adaptive and if we think it's going to help us and the economy, we would review the situation," he added.

Najib said the ringgit, which traded at a 13-year high of 3.11 to the dollar on September 6, was reflective the country's economic fundamentals.

"We are monitoring it in terms of both our fiscal and monetary policy to make sure that the ringgit reflects the fundamentals of the economy and at the moment, we believe it does and the stronger ringgit doesn't seem to have a negative impact on our exports," he added.

Malaysia had banned offshore trading of the ringgit at the height of the Asian financial crisis in 2008 with the central bank only recently allowing the settlement of offshore trade in goods and services, in the country's currency.

The strengthening ringgit comes on the back of strong economic growth in the first two quarters and a series of interest rate hikes by the central bank.

The Malaysian economy grew by a blistering 10.1 percent in the first quarter of the year and by 8.9 percent in the second quarter, with growth expected to exceed six percent in the full year, according to the central bank.

Bank Negara also raised the overnight policy rate (OPR) by 25 basis points to 2.75 percent in July, the third time this year.

Last year, the central banks of China and Malaysia signed a currency swap agreement ease liquidity trouble as they boost the amount of yuan that Malaysian banks can draw on while servicing local companies that use the Chinese currency when trading.

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