Malaysian Risk. Clayton Moore is the manager of an international money market fund managed out of London. Unlike many money funds that guarantee their investors a near risk-free investment with variable interest earnings, Clayton Moore’s fund is a very aggressive fund that searches out relatively high interest earnings around the globe, but at some risk. The fund is pound-denominated. Clayton is currently evaluating a rather interesting opportunity in Malaysia. Since the Asian Crisis of 1997, the Malaysian government enforced a number of currency and capital restrictions to protect and preserve the value of the Malaysian ringgit. The ringgit was fixed to the U.S. dollar at RM3.80/$ for seven years. In 2005, the Malaysian government allowed the currency to float against several major currencies. The current spot rate today is RM3.13485/$. Local currency time deposits of 180-day maturities are earning 8.900% per annum.

The London eurocurrency market for pounds is yielding 4.200% per annum on similar 180-day maturities.

The current spot rate on the British pound is

$1.5820/£, and the 180-day forward rate is $1.5561/£.