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As the ringgit continues to weaken against the US dollar, an economist sees pegging as not the solution, as it will invite speculative attacks on the currency.

In his view, Dr Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors said: “I think pegging the ringgit to the dollar will be hard, given Malaysia’s declining reserves and it would just invite speculative attacks.

“This is especially at a time when the oil price is still falling and other countries are also seeing their currencies decline.

“It’s best to just ride it out and wait for a boost in exports from the lower ringgit,” he told Bernama in Singapore today.

Oliver was commenting on the declining ringgit against the greenback as well as the Singapore dollar.

The ringgit opened lower this morning at below the 4.26 level against the US dollar.

Moody’s Investors Service vice president and senior analyst, Christian de Guzman, said capital outflows that have precipitated the fall in the ringgit are credit negative.

“A weaker ringgit will have differing impacts on Malaysian companies.

“It would be negative for companies that may be exposed to a strengthening in the US dollar through cross-border debt as their servicing obligations are now higher in ringgit terms.

“On the other hand, companies whose products compete in the international market, are likely to benefit from a weaker ringgit. This includes manufactured goods whose cost of labour and other domestic inputs have fallen in respect of the US dollar,” he added.

- Bernama

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