Malaysia and the End of the Bretton Woods System 1965–72: Disentangling from Sterling

This article examines the tense and complex monetary relationship between Britain, Singapore and Malaysia in the period from 1965 to 1972. It questions the assumption that Malaysia's economic significance to Britain was ‘on the wane’ by the 1960s. As the second largest government holder of sterling assets in the world, Malaysia should have been able to exert considerable leverage in London over the disposition of these assets. Ultimately, however, the very scale of these assets limited Malaysia's room for manoeuvre, as it could not sell off a significant proportion of them without undermining international confidence in the exchange rate of the pound and thereby precipitating the devaluation of its remaining sterling assets. The devaluation of sterling in 1967 emerges as a watershed in relations between London and Kuala Lumpur, with the Malaysians thereafter seeking to forge a more independent monetary policy. It is clear, however, that they did not actually succeed in doing so until 1972.