The Malaysian ringgit pushed through 3.5 against U.S. dollar to a nine-year high on Tuesday as Asian currencies rallied in the belief the Japanese yen's weakness will be discussed at this week's Group of Seven meeting.
Short covering in the yen pushed the currency up to near 120 against the dollar and sparked a 0.3% rise in South Korea's won to around 932 against the dollar.
The Malaysian ringgit firmed decisively past 3.5 against the dollar to hit 3.4936, its strongest since early 1998, helped by what traders said was the surprising absence of dollar-buying
intervention from the central bank, Bank Negara.
"They have stepped away from 3.5. I don't think they can afford to keep the ringgit too weak against the other currencies," a Singapore-based trader said, referring to the
The ringgit, among Asia's top gainers so far in 2007, had found heavy upside resistance around 3.5 since mid-January and that supported the market view that Bank Negara was buying
dollars to rein in the currency.
Suresh Ramanathan, head of market economics and strategy at Affin Investment Bank in Kuala Lumpur, said the central bank had soaked up around $3.27 billion worth of funds from the local
market on Friday and a similar amount on Monday.
"This suggests that the inflows into the market are on a scale Bank Negara possibly cannot handle. "They had to let the currency strengthen further," Ramanathan said.
Besides, if the central bank had stopped the currency from firming past 3.5-per-dollar despite the rise in the other Asian currencies and inflows into Malaysia, it would have signaled that Malaysian authorities were targeting a specific level for the currency. Such a signal would attract more foreign speculative capital, he said.
Indeed, Malaysia's central bank chief, Zeti Akhtar Aziz said on Monday that authorities had no set targets for the ringgit. "We don't have any pre-determined rate of the currency but we
would like to see orderly movements," she told reporters when asked if 3.5 was a key technical level for the ringgit.