The Philippines cranked up overnight interest rates yesterday to fend off attacks on the peso, while Malaysia defied conventional wisdom and lowered interest rates even as the ringgit weakened. Malaysia cut its three-month interbank rate 50 basis points to 10 per cent - its second cut in two weeks - in a move aimed at lowering credit payments for the country's debt-ridden corporates, and ultimately reviving domestic demand. 'The Malaysian economy is facing the possibility of a large number of bankruptcies, so lowering its rates is beneficial to their economy,' Bank of America head of currency strategy for Asia Marshall Gittler said. 'Their currency has already come under great speculative pressure. A lot of speculators have cleared out.' Yet going forward with the planned rate cuts was a controversial move in the face of heightened pressure on the mainland to devalue the yuan, which many fear will usher in a new round of regional devaluations. Few markets or currencies were spared yesterday in the face of these concerns. 'This just shows how off the mark policy-making in Malaysia is,' Santander Investment chief economist Mark Mcfarland said. He said the Philippines had employed a more prudent policy, one that focused on financial reforms and recognised that it was necessary to 'raise interest rates when you have foreign-debt liabilities'. Yesterday, the Philippines central bank announced it was raising overnight lending rates from 13 per cent to 15 per cent 'amidst the sharp depreciation of the peso in the foreign exchange market'. The peso ended at 44.18 to the US dollar from the previous session's 43.49. 'We have gone through this several times in the past and we know how to handle the situation,' the central bank governor was reported saying. The ringgit closed the session down 1.23 per cent yesterday at M$4.225 against the dollar. Many analysts support Malaysia's experimentation with monetary easing. SG Securities global strategist Bijal Shah pointed out that other economies in the region had lowered rates without opening their currencies to attacks. South Korea halved its interest rates over the course of the first half, yet its currency recently hit year-highs. Thailand lowered its rates by 5 per cent through July during which time the baht was basically unscathed. Mr Shah said he thought continuing on a diet of punishing interest rates would only increase regional bankruptcies and stifle domestic demand, trapping Asia in recession for longer than necessary.