The Evaluation of the Foreign Currency Regimes Utilised by Hong Kong, China and Malaysia Free Essay Example, 3000 words

The Malaysian Ringgit has recently become a managed float after removing its peg to the US Dollar in July 2005. It will now be trade-weighted to a basket of currencies (Economist Intelligence Unit 2005). Malaysia made this move the same day that China un-pegged its currency since then the ringgit has appreciated (Arnold 2005). Malaysia uses a currency basket that is made up of its major trading partners, most of which are in the Asian region. The central bank feels that this will help to keep their currency stable in the world market. This requires constant monitoring by the bank to ensure that the currency maintains its value. The system employed is similar to that of China where a currency board at the central bank monitors the rate. Indonesia has had 3 different exchange rate policies over the course of the last 30 years. From 1970-1978 they operated on a fixed exchange rate policy, then switched over to a managed float in 1978 and finally since 1999 have been operating on a free -floating exchange rate system (Bank Indonesia, 2006). Since they have implemented a free-floating system the value of the Rupiah is determined by the market. We will write a custom essay sample on The Evaluation of the Foreign Currency Regimes Utilised by Hong Kong, China and Malaysia or any topic specifically for you Only $17.96 $11.86/page However, there are strengths and weaknesses associated with using this kind of exchange rate system. The main strengths associated with this system are that a country is not necessarily affected by the problems of other countries; examples include unemployment and inflation (Madura 2006, 176-177).