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November 13, 2008

Malaysia central bank - Reserves drop is temporary
The drop in Malaysia's international reserves will be temporary and the trend will later be reversed, Reuters reported, quoting a local newspaper which cited the central bank governor.

Malaysia's international reserves stood at $100.2 billion on October 31, down more than $125 billion earlier in the year, according to the latest reserves data released by the central bank.

"Are we concerned (about the fall in reserves)? No, because this is part of the deleveraging process and immense demand for US dollars by the international investment banks and other entities that are deleveraging," Zeti Akhtar told the Star newspaper.

Zeti said the decline was mainly due to the reversal of short-term capital inflows which do not represent a permanent part of reserves and could flow out due to external factors.

"There is, therefore, no cause for concern as this (short-term funds flowing out) is well within our expectations. This is expected to reverse once the deleveraging process is completed," she told the newspaper.

Zeti said the outflows were beginning to subside. The most significant deleveraging was in October, she said.

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