Malaysia's undervalued ringgit is making Malaysia's imports more expensive. It has raised the risks of imported inflation and has discouraged the importation of much needed technologies and manpower with desired technical skills in Information Communication Technology and Biotechnology. It hurts companies like Proton, which are reliant on imported vital components parts for its cars.

In addition, the Central Bank has to cope with the challenge of managing a rising current account surplus. This had been fuelled in part by inflows of speculative capital attracted by the possibility a ringgit revaluation.

There has been heavy buying of the ringgit against the US dollar in recent weeks. The magnitude of the inflow of speculative money into the country is reflected by the swelling inter-bank liquidity, which now stands at about RM140 billion.

This is not withstanding active mopping up activities undertaken by the Central Bank to maintain its Overnight Policy Rate at around 2.75%.This rate is now grossly artificial.

Former prime minister Dr Mahathir Mohamad seems to suggest that the ringgit could in time be re-pegged at a different level. Many are of the view that this should be replaced by a more flexible managed float by tying the ringgit to a basket of currencies.

The Central Bank appears to be preparing for this possibility as it has been seen to be accumulating large amounts of the Euro in recent months. This seems to suggest that the new basket of currencies would likely to be weighted towards the Euro.

Malaysia's bitter experience has proven that even a managed float is not good enough to insulate it from aggressive and concerted attacks by currency speculators with large war chests as some of the international hedge funds have.

At the height of the 1997/98 Asian financial crisis, it has been estimated that the funds at the disposal of the hedge fund managers and other currency speculators were more that the combined reserves of Asean banks.

Major central banks in the region including those of Malaysia. Thailand and Indonesia are believed to have lost no less than US$50 billion in defending their respective currencies against the opportunistic ambush launched by currency speculators.

My reading is that a ringgit re-pegging exercise in now under serious discussion. The is certainly is difference of opinion between the financial regulators and certain quarters in the government. It revolves around 'how', and 'how much' rather than 'when'.

The re-peg could happen very soon. The announcement would normally be made on a non-trading day, usually a Saturday, or on a public holiday.