Regional Trading Agreements
Historial Exchange Rate Regime of Asian Countries
 
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  Untitled Document
Malaysia
  The currency of Malaysia is Malaysian Ringgit (RM), formerly known as the Malaysian Dollar (M$). In June 1967, the 3 separate dollars including M$ replaced the old Sterling-linked Malaysian/Straits Dollar and the unit of M$ was created. The Bank Negara Malaysia (Central Bank of Malaysia) administered exchange controls on behalf of the Malaysian Government throughout Malaysia, with authority delegated to the authorized banks.

In the earliest time, M$ was linked to Pound Sterling. With the floating of Sterling and dismantling of the Sterling Area, Malaysia adopted the U.S. Dollar as the intervention currency in place of the Sterling in June 1972. The Effective Rate was established with a fluctuation range. Since June 1973, Malaysia placed the Effective Rate for her dollar on a controlled, floating basis. The Central Bank of Malaysia intervened only to maintain orderly market conditions and to avoid excessive fluctuations in the value of the Ringgit in terms of Malaysia's trading partners and the currencies of settlement (Ariff, p.329).

In June 1975, the controlled, floating Effective Rate was replaced. In order to maintain orderly exchange rate, Malaysian government adopted a new exchange regime. The external value of the Ringgit was to be determined in terms of a basket of representative major currencies, weighted on the basis of the major currencies of settlement as well as those of countries which were the major trading partners of Malaysia (Ariff, p.159). In August of the same year, the M$ was officially renamed, known as the Ringgit (RM). The same exchange rate determination was sustained up till the Asian Financial Crisis in 1998. The exchange rate of the Ringgit was no longer determined by demand and supply in foreign exchange market. Malaysia returned to a fixed exchange rate system, pegged a rate against the U.S. Dollar at RM3.80 per $1.

Major sources of reference include:
1) World Currency Yearbook (WCY)
2) IMF Annual Report on Exchange Arrangement and Exchange Restriction (IMF)
3) Ariff, Mohamed. 1991. The Pacific Economy: Growth and External Stability. North Sydney: Allen & Unwin Pty Ltd. (Ariff) 
   
 
Date
Changes to the exchange rate regime
Malaysian Ringgit per U.S. Dollar
12 June 1967The unit of Malaysian Dollar was created.

The old Sterling-linked Malayan/Straits Dollar was replaced by separate dollars of Malaysia, Singapore and Brunei. All these 3 currencies can be freely interchangeable. (WCY 1984, p.495) 

 
15 August 1971The Malaysian Dollar linked to the Pound Sterling at a fixed rate M$7.3469 per Sterling Pound. (WCY 1984, p.495)  
20 December 1971A new Official Rate was established at a rate M$2.81955 per U.S. dollar which based on the Malaysian Dollar's unchanged gold content. (WCY 1984, p.495) 2.820 
25 June 1972With the floating of Sterling and the dismantling of the Sterling Area on 23 June 1972, Malaysia broke the Malaysian Dollar's ties to the British unit and linked the currency to the U.S. Dollar with a fluctuation range for the Effective Rate. The range is between M$2.7561 and M$2.8830 per U.S. dollar. (WCY 1984, p.495)  
13 February 1973Following the U.S. Dollar devaluation in February 1973, the Official Rate of Malaysian Dollar was realigned to M$2.5376 per U.S. dollar, based on the currency's unchanged gold content.

The new fluctuation range for the Effective Range was defined, M$2.4805-M$2.5947 per U.S. dollar. (WCY 1984, p.495) 

2.538 
8 May 1973Malaysia abrogated the accord with Singapore providing for the free exchangeability at par of the Malaysian and Singapore Dollars, which had been functioning since 1967. (WCY 1984, p.495)  
22 May 1973The unrestricted exchange at par of the Brunei Dollar and the Malaysian Dollar was suspended and the currency interchangeability agreement with Brunei was rescinded. (WCY 1984, p.495, 496)  
21 June 1973The authorities ceased to maintain the exchange rate within announced margins. (IMF 1976, p.303)

Malaysia placed the Effective Rate for her dollar on a controlled, floating basis. (WCY 1984, p.495) The Central Bank of Malaysia intervened in order to maintain relative stability in the value of Ringgit in relation to the basket of currencies. (IMF 1979, p.266)

If the exchange rate of Ringgit was fluctuated, the Central Bank would intervene and maintain the rate close to the Official Rate, M$2.5376 per U.S. dollar. 

 
21 August 1975The Malaysian Currency (Ringgit) Act 1975 amended the Central Bank of Malaysia Ordinance 1958. (IMF 1976, 305)

The Malaysian Dollar (M$) was officially renamed the Ringgit (RM). (WCY 1984, p.495) 

 
27 September 1975The controlled, floating Effective Rate for the Ringgit was replaced, the external value of the Ringgit was determined on the basis of its relationship to a weighted basket of currencies of Malaysia's major trading partners. (IMF 1976, p.305)

The minimum reserve requirement was 80.59% in gold and foreign exchange for Malaysian banknotes. (WCY 1990/93, p.475) 

 
1978Rates for all other currencies were determined on the basis of the Ringgit-U.S. Dollar rate and the U.S. Dollar rates for those currencies in markets abroad. (IMF 1979, p.266)  
1986The commercial banks were free to determine and quote exchange rates for all currencies, other than Israeli and South African currencies, to customers.

The commercial banks were permitted to deal forward in all currencies other than Israeli and South African currencies, and were free to determine the rates. (IMF 1987, p.332) 

 
31 March 1989Following the IMF classification, Malaysia was considered to be pegged to composite basket of currency. (Ariff, p.155)  
1992The commercial banks were free to determine and quote exchange rates for all currencies, other than those of Israeli, South African and the Federal Republic of Yugoslavia (Serbia and Montenegro), to customers.

The commercial banks were permitted to deal forward in all currencies other than those of Israeli, South African and the Federal Republic of Yugoslavia (Serbia and Montenegro), and were free to quote the rates. (IMF 1993, p.312) 

 
28 September 1993All exchange control restrictions governing transactions with South Africa were lifted. (IMF 1994, p.312)  
1995Foreign exchange contracts were effect freely for commercial transactions; prior approval was required for financial transactions. (IMF 1996, p.299)  
4 August 1997The Central Bank of Malaysia imposed controls requiring banks to limit outstanding noncommercial-related Ringgit offered side swap transactions to $2 million a foreign customer. (IMF 1998, p.556)  
2 September 1998The exchange rate was no longer determined by demand and supply. The Central Bank announced that the exchange rate of the Ringgit would be pegged against the U.S. Dollar at RM3.80 = $1. (IMF 1999, p.532)  

Notes:

The exchange rate in the 3rd column is the Official Rate which set by the Central Bank of Malaysia. Malaysia placed the Effective Rate for her dollar on a controlled, floating basis since June 1973. The exchange rate of Ringgit was free to float in exchange market. But as the rate deviated far from the Official Rate. The Central Bank of Malaysia would intervene the market through open market operation which maintained the rate closing to the Official Rate.

© 2000 The Chinese University of Hong Kong