China and Malaysia changed fx policy

I came back home to find out that China announced that it would shift to currency basket regime and renminbi would be revaluated to USD = RMB 8.11 from RMB 8.28. It seems that Malaysia has shifted to managed float as well. I could confirm the news of China on WSJ, and the one of Malaysia on the website of Bank Negara Malaysia as follows:

http://www.bnm.gov.my/index.php?ch=8&pg=14&ac=1054

Malaysia Adopts a Managed Float for the Ringgit Exchange Rate
Bank Negara Malaysia announces today that the exchange rate of the ringgit with immediate effect will be allowed to operate in a managed float, with its value being determined by economic fundamentals. Bank Negara Malaysia will monitor the exchange rate against a currency basket to ensure that the exchange rate remains close to its fair value. Promoting stability of the exchange rate continues to be a primary objective of policy.

Changes in the international and regional financial and economic environment have made it important for Malaysia to have a stable exchange rate against its major trading partners, in particular, the regional countries. Consequently, the stability of the ringgit exchange rate against the regional currencies will become increasingly important. Such stability can best be achieved by maintaining the value of the ringgit against a trade-weighted index of Malaysia’s major trading partners.

This announcement represents a change in the system by which the value of the ringgit is determined. Given that the current valuation of the ringgit is consistent with our fundamentals and after taking into consideration developments in our trading partner countries, the exchange rate after shifting to this new system is not expected to deviate significantly from the current prevailing level.

Bank Negara Malaysia
21 July 2005

East Asian economies should come into a new era where most countries could adopt currency basket individually. It should be in consistent with the inflation targeting of most economies and it would pave ways for economies in the region to start policy cooridination in the area of foreign exchange and monetary policy. Of course economies whose currencies are pegged to US dollar should be under some kind of pressure to reconsider their ways, but all depends on what kind of currency basket China has taken. As was shown in the case of Asian currency crisis, how to manage the foreign exchange regime should be quite important compared with what kind of regime is being taken.