(Bloomberg Opinion) — Former Malaysian leader Mahathir Mohamad was wary of currency traders, believing their herd mentality could cause economic damage. During the Asian financial crisis in the late 1990s, he pegged the ringgit to the dollar and imposed capital controls. A later administration allowed the ringgit to float again, adopting a more conventional economic approach. This strategy recently paid off as the ringgit saw a significant rally, becoming the top performer among emerging market currencies in the third quarter, closely followed by the Thai baht.
The current appreciation of the ringgit, about 15%, and the baht, over 13%, is attributed to the Federal Reserve’s recent interest rate cuts and the resulting dollar retreat. Both Malaysia and Thailand have embraced economic orthodoxy and stability, avoiding the conflicts and dramatic actions of the past. Malaysia, in particular, faced political instability and corruption scandals in the past decade but has since shown political resilience under Prime Minister Anwar Ibrahim, who established a unity administration in 2022.
Despite recent global economic turmoil, both countries maintained economic stability. Malaysia and Thailand, which played significant roles in the Asian economic downturn of 1997-1999, are experiencing a resurgence. Thailand now even worries that the baht might be too strong. While the global FX market’s volatility is driven mainly by sentiment towards the dollar, the achievements of Malaysia and Thailand deserve recognition.
The Fed’s monetary policy shifts provided a supportive backdrop, but these nations were prepared to seize the moment when it arrived. Their success is a testament to prudent economic management and readiness to capitalize on favorable conditions.
(Bloomberg Opinion columnist Daniel Moss covers Asian economies and previously served as executive editor for economics at Bloomberg News.)
Original Story https://www.livemint.com/news/malaysia-loses-its-currency-rebel-tag-and-wins-11727732981474.html
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