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Malaysia Allows Market Conditions to Determine Exchange Rate


Malaysia's central bank says it will let market conditions determine the exchange rate of its currency. The country also is trying to attract more budget airlines by opening the region's first no-frills airport - a few days before neighboring Singapore opens its own budget terminal.

Malaysia will allow market conditions to help determine the exchange rate of its currency, the ringgit.

Last July, the central bank ended a seven-year peg of the ringgit to the dollar, which it introduced during the Asian financial crisis. However, since then, movement in the currency has been very moderate and it has not freely floated in the market.

The central bank did not state exactly how much influence market conditions will have on the ringgit. But analysts think that greater exchange-rate flexibility will lead to a stronger currency.

Thio Chin Loo, a currency analyst at BNP Paribas in Singapore, says the ringgit has already gained two-point-four percent this year, hitting a high of 3.69 against the dollar last week.

"The ringgit has outperformed most other Asian currencies because of the increased faith being put into Malaysian assets," said Thio. "The stock market has done quite well in Malaysia this year and recently as well there has been quite a few houses [investment banks] upgrading Malaysia's rating in portfolios. There is a lot of good news and the ringgit has reflected that."

Malaysia and its neighbor Singapore have opened South East Asia's first no-frills airline terminals.

Malaysia's $29 million Low-Cost Carrier Terminal, 20 kilometers from Kuala Lumpur's International Airport, is designed to handle 10 million passengers a year. Singapore's Budget Terminal, built for $28 million, can serve 2.7 million passengers.

Both countries are competing to become the leading regional hubs for the fast-growing numbers of budget airlines in Asia.

A Thai court said decrees for the privatization of the state-owned Electricity Generating Authority of Thailand are invalid, stopping what was expected to be Thailand's biggest initial public offering.

The court ruled that the privatization process had been marred by political conflicts of interest.

The ruling is a major blow for the Thai government's policy of privatizing state enterprises.

And in news from China, U.S. retail giant Wal-Mart said it plans to open 20 new stores and hire as many as 150,000 people in the country over the next five years.

Wal-Mart first entered China in 1996 and now has 56 stores employing about 30,000 people.

China is also the leading source of goods the retail chain sells in its stores in the United States and other countries.

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