The impact of change: from fixed rate to managed float

How will the change from fixed to managed float exchange rate affect us?

Yes, we can anticipate a more vibrant stock market as it was back in pre 1997 asia financial crisis.

Theoretically,

1. It is almost certain that Malaysia economy will perform much better in the second half of this year and next. Hopefully we will all enjoy a good employment market. :-)
   
2. Stock market landscape changed with one single decision from BNM. It may be too early to predict, but I am now rather optimistic on the next one and a half year.
   
3. The most important things of all in an upswinging economy is that interest rate will, inevitably, rise. If you have a home loan with floating rate it MAY BE wise to get a loan with fixed rate.
   
4. Those with good memory may still remember that our interest rate was once above 11%, pre-1998. Insurance companies offer extremely good rates though with inflexible repayment period. (Most of the time, you cannot make an early repayment without suffering penalties. Depending on one financial position, inflexibility can create big opportunity loss.) An Islamic home loan with a good fixed rate may be a good solution.

Overall, it was a good move though unnecessary. (Why change if fixed rate works well? Just to please foriegn fund managers?) It caught everyone by surprise.

Most foreign fund managers and a number of local fund managers, who reacted fast on the liberalization of capital control to invest overseas, were caught at the wrong side of the fence. It saves our central bank's money, good for the country. But can you sense the bitterness of foreign media that there were so little news coverage as compared to their earlier loud noise on our fixed exchange rate regime?

More news on exchange rate

Looking back: Closing the last chapter of the financial crisis
Original text of the announcement from Bank Negara Malaysia
What is managed float?
Interview with Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz

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