(AFP) - The Malaysian ringgit is not overvalued and its peg to the US dollar will stay despite weakening regional currencies, Prime Minister Mahathir Mohamad said today.

"I don't think it is overvalued at all. We are still able to compete ... our exports are still very high," the premier told a press conference.

"Even if you lower the ringgit to five dollars or ten dollars, but if there is no market we still cannot sell even if it is cheap."

The ringgit has been fixed at 3.80 to the dollar since September 1998.

The premier said yesterday the government may consider fixing a new exchange rate if the ringgit experienced a sustained 20 percent fall or rise against regional currencies.

However, he said today: "The ringgit peg will stay because we don't see that the other currencies are going to fall or increase by 20 percent ... they go beyond that and come back, that is not a reason for changing it."

There has been market speculation that the peg may be changed as regional currencies slump, making their exports more competitive in dollar terms.

The speculation helped push the local stock market down sharply earlier this month.

Miss the boat to re-peg

Meanwhile, the Malaysian Institute of Economic Research said now is not the time to re-peg.

Such a move could be considered when the economy was growing at about 6.0 percent and when regional currencies were stable, said its executive director Mohamed Ariff.

"We have missed the boat (to re-peg) but we cannot stick to the 3.80 exchange rate to the US dollar forever," he told a press conference.

He said the idea of pegging was good during a crisis as it reduced uncertainty and provided stability, but it only worked for a short time and "long term implications are not favourable".