Don't get too caught up by this interest rate parity thing.

Int Rate Parity


"In recent years the interest rate parity model has shown little proof of working.

In many cases, countries with higher interest rates often experience it's currency appreciate due to higher demands and higher yields and has nothing to do with risk-less arbitrage."


It makes perfect sense and is common practice to raise interest rate when trying to prop up a currency.

Example: From 2008 to 2011, interest rate in Australia was much higher than in USD(dunno exactly how much but rates in Oz has always been high) and AUD strengthened significantly against USD.

Forex market has too many variables going on for it to be simplistically predicted by int rate parity.

Please reconsider your plan. It will not work. How much capital you have trading forex market? First, answer that honestly. You better get yourself employed as soon as possible. Do not waste your crucial youth period trying to outsmart pros.

What? The "putters" will laugh all the way to the bank if peg RM5 to USD1.

I suggest :

1) Do not hike interest rate.

2) Start to tighten flow of funds. Make it harder for funds to come out. Encourage inflow of funds by corporates etc.

3) Hike GST 1% to show sincerity in improving budget. Cut petrol subsidies for the same reason. Better allocation of resources.

4) Continue to raise money by issuing government bonds after the above steps.

5) Let the ringgit have a controlled slide to US4.5 to 4.80. Make exports competitive. Discourage overseas spending. Trade balance will improve and shore up forex reserves.

6) Do not increase corporate and personal income tax. Do not increase int rate. Not even 0.25%. That will send wrong signal.

7) Spend as little as possible on defending ringgit. Just spend enough for it to slide to 4.8. With fiscal prudence and improved trade balance, RM might even surprise ny strengthening. Do not fight the market. Is is futile.

If RM not traded outside Malaysia, why kind of contracts involving RM are traded outside of Malaysia that will give indication of RM exchange rate?

Are the rates/charts on RM provided by XE.com indicative rates inferred from these forward contracts or are they actual spot forex rates provided by forex markets in local banks or are they provided by BNM?

Where are Ringgit futures traded? I don't think there is any ringgit futures contract.

I am also a bit confused by what you said about Soros finding it impossible to speculate on the Ringgit and yet you seem to imply that the ringgit was weak because of speculative attacks?