Factors in Malaysian currency crisis, response and challenge

Abstract

Financial market which are widely understood to e global mechanism has resulted in a surge of capital flows around the world. The combination of open capital market and the expanding speculative content of a long boom helped to expose flaws in the systems of macroeconomic management which lead to currency crisis. Currency crisis to banking failure have typically had severe economic wide effect which lead to financial crisis. Currency crises in Europe, Mexico, and Asia have drawn widespread attention to speculative attacks on government controlled exchange rates. In mid 1997, Asian currency crisis that began with speculative selling of Thailand's bath hit the region with Malaysian Ringgit having lost its value to about 70% as against the US dollar. This leads to other economic problems that saw the local bourse KLSE shed its value to 60% from its peak, business corporations reporting poor financial performance, increasing domestic interest rates, high inflation rates and rising unemployment rates.