Mahathir Is Cornered by His Currency Peg

Malaysia's ringgit appears overvalued, and the country's reserves are dwindling. Will the Prime Minister cave in and devalue?

Malaysian Prime Minister Mahathir Mohamad has rarely been at a loss for words about any perceived threat to his country's currency. In fact, he's infamous for his outrageous canards on the subject. In April, 1998, for example, in a BusinessWeek interview, he blamed a "Jewish conspiracy" for supposedly undermining the ringgit. But when Malaysia's central bank announced on Apr. 16 that foreign reserves had fallen 9%, or $2.7 billion, during the first three months of 2001, Mahathir was conspicuously discreet.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.