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Foreign Exchange Committee Recommends Close-out of Ringgit Positions.

NEW YORK--(BUSINESS WIRE)--Sept. 2, 1998--On Sept. 1, 1998, Bank Negara Malaysia (the central bank of Malaysia) announced certain exchange controls involving the Malaysian ringgit and has subsequently made a number of written statements regarding the applicability of these controls. The Foreign Exchange Committee (the "Committee") understands that, as a result of these announcements, foreign exchange trades involving ringgit that were entered into before Sept. 1, 1998, may legally be settled until Sept. 9, 1998. Transactions involving ringgit that settle after Sept. 9, 1998, will be subject to exchange controls and may be settled only with the specific approval of Bank Negara Malaysia.

The Committee understands that the settlement process in ringgit has been severely disrupted, which has exposed market participants to unanticipated risk. The Committee recommends as a best practice that all parties to ringgit transactions entered into before Sept. 1, 1998, agree to terminate these transactionsand settle them in U.S. Dollars as quickly as possible, and in any event by Sept. 9, 1998. The Committee strongly urges this practice as a way to mitigate market risk and promote orderly settlement of ringgit positions by all participants in the foreign exchange market.

The Committee believes that parties to each ringgit transaction must determine a close-out mechanism suitable to their needs. Market practice on close-outs of existing transactions normally involves valuing future payments with a view toward determining discounted future cash flows. The Committee urges that parties to outstanding ringgit transactions contact each other to facilitate speedy agreement on these and other points necessary to close out their ringgit positions.

The Foreign Exchange Committee was formed in New York in 1978 and includes representatives of major commercial and investment banks and foreign exchange brokers. The Foreign Exchange Committee represents many of the most significant participants in foreign currency trading.

 CONTACT: The Foreign Exchange Committee, New York
 212/720-6651
 e-mail: Committee@ny.frb.org


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Publication:Business Wire
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Geographic Code:9MALA
Date:Sep 2, 1998
Words:315
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