Many analysts had said that recent gains among the region's currencies, particularly the Indonesian rupiah, the Korean won and Thai baht, might prompt Malaysia to revise the peg to 3.5 to the US dollar.

Adding to the confusion, other analysts suggested a possible devaluation of the ringgit to 4.2 per dollar because of weak domesticeconomic conditions.There was also speculation Malaysia might unpeg the ringgit and impose a managed float, allowing it to fluctuate by a limited amount.

Mahathir also said the introduction of capital controls and other expansionary fiscal measures had begun showing results.

He said the domestic stock market's capitalisation had improved by 180 billion ringgit ($47.37 billion) since September, during which time the Kuala Lumpur Stock Exchange's blue-chip Composite Index had risen by more than 50 per cent.

The KLSE Composite Index ended at 533.88 on Friday. It hit a low of 261.33 on September 1, when the capital controls were introduced.

"We had lost 700 billion ringgit in market capitalisation," Mahathir said, noting market capitalisation was more than 900 billion ringgit when the Composite Index was at the 1,200 level before the regional financial crisis struck last year.

The prime minister stopped short of making any promises to the fund managers, but economists said Malaysia has set a course forreturn to the international financial system.

The economists said despite the government's denial, currency controls -- which have been criticised by foreign investors who have stayed away from Malaysia -- were expected to head for a phased exit in the not so distant future.