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[KUALA LUMPUR] The central banks of Malaysia and Thailand agreed on Thursday to promote the greater use of their currencies to settle trade between the two countries, in the latest attempt by emerging economies to reduce their exposure to increasingly volatile global markets.
The governors of Bank Negara Malaysia and the Bank of Thailand signed a memorandum of understanding to encourage the use of the Malaysian ringgit and Thai baht by the private sector to settle cross-border trades and direct investment, the banks said in a joint statement.
The MOU would "establish a framework that will pave the way for greater financial and economic integration in the Asean region," the statement said.
The arrangement would reduce the risks of exposure to the volatility of global settlement currencies and also lower transaction costs for businesses, it added. "This bilateral arrangement would further strengthen trade and investments flows between Malaysia and Thailand as well as in fostering closer economic linkages for the advancement of the region," BNM Governor Zeti Akhtar Aziz said. "I believe this would further strengthen cooperation as well as boost economic and investment development in the region,"Bank of Governor Prasarn Trairatvorakul said.
The deal comes as many emerging economies are facing slowing economic growth, weaker stock markets and depreciating currencies.
Indonesia said on Thursday it will unveil a policy package intended to prop up the rupiah, which hit another fresh 17-year low, and boost investment at a time Southeast Asia's largest economy faces its weakest growth in six years.