Newspaper Article

Muslim-majority nations like Turkey, Indonesia, Egypt and even Malaysia have seen their currencies depreciate and come under pressure in the recent past. Turkey and Egypt have had to increase domestic interest rates substantially to ease the exchange rate pressure. Indonesia, too, had to raise rates, albeit of a much lower magnitude. The choice of an exchange rate policy - whether pegged, free floating or managed - depends on the trade-off preference. Fixed or pegged exchange rates offer stability, but this has to be traded off against the lack of independence in monetary policymaking. A freely floating currency has the advantage of providing full flexibility in policymaking, but has to be traded off against the lack of exchange rate stability. Faced with these trade-offs between fixed and free floats, many countries chose to be in between the two, with managed floats.

De-dollarising seems to be in vogue these days. China, Russia and their BRICS (Brazil, Russia, India, China and South Africa) partners may have initiated the narrative but the desire to remove or at least reduce the US dollar's hegemony has spread. Many nations, including Malaysia, have openly articulated their desire to move away from US dollar dependence for their trade. Though it has been a long time coming, the rising disdain of the US dollar is in no small part due to American policy hubris and abuse of its reserve currency status. As the only country that can repay its foreign debt in its own currency, it has run years of current account deficits, created a mountain of debt surpassing US$30 trillion (RM136 trillion) and effectively piggybacks on the rest of the world with its autarchic monetary policies.