Dow Jones Newswires -- October 16, 1998
Malaysia's Bank Negara Raided 10 Illegal
Forex Dealers Thu
Dow Jones Newswires
KUALA LUMPUR -- Malaysia's central bank Thursday raided 10 illegal
money changers in a bid to stamp out a flegling black market for dollars that
is threatening to develop amid rigorous new capital controls, the bank said
Friday.
Bank Negara said six backstreet foreign-exchange dealers were raided in
the capital, and another four in the surrounding state of Selangor. "Various
foreign currencies and relevant documents were seized," the bank said.
The illicit dealers are now being investigated, and could face a prison term
of up to five years, a fine of up to 100,000 ringgit (MYR) ($1=MYR3.80), or
both.
Concern over the spread of a black market is heightening after Malaysia
curtailed flows of short-term, speculative funds at the beginning of
September, a move that effectively pegged the ringgit at MYR3.80 to the
dollar.
The ringgit had been trading at around MYR4.20 to the dollar before it
became clear that capital controls would be introduced.
With the new foreign exchange peg, the Malaysian government was able to
aggressively loosen monetary policy in a bid to reflate the badly sagging
economy. However, this is also raising fears of higher inflation and greater
demand for foreign currencies in several months' time.
Malaysia's foreign exchange black market is still in its early stages, though,
and the hoarding of dollars is mostly being done by illicit street dealers.
They're picking up U.S. dollars in expectation of increased demand kicking
in later on.
Going rates appear to be around MYR4.05-MYR4.20 per dollar.
Analysts say Malaysia's political problems aren't helping to calm the
situation. Kuala Lumpur has been racked by unprecedented street protests
against the rule of Prime Minister Mahathir Mohamad, who fired his popular
deputy, Anwar Ibrahim, on Sept. 2.
Anwar is now facing trial on homosexual and corruption charges,
accusations that he and his supporters say were cooked up to undermine
any threat to Mahathir's leadership.
The trial begins Nov. 2.
-By James Hookway; 603 292 5254; jhookway@ap.org |
