Exotic currencies see explosive growth: Dealers<\/p>\n
SINGAPORE (Reuter): Offshore trading of Southeast Asian
\ncurrencies is undergoing explosive growth in Singapore on the
\nback of spectacular volatility and rising investment flows into
\nthe region, foreign exchange traders say.<\/p>\n
They said in recent interviews with Reuters that up to 90
\npercent of the trading is speculative in nature -- particularly
\nin the Malaysian ringgit, the Thai baht and the Indonesian
\nrupiah.<\/p>\n
\"The growth in ringgit spot volumes here has been more than
\nfive times over last year,\" the chief dealer of a major Asian
\nbank in Singapore said.<\/p>\n
He said there are now about 10 banks which act as market
\nmakers for the ringgit compared with two last year, adding that
\ndealing amounts had also risen sharply.<\/p>\n
Banks now regularly deal in orders of US$5 million to $10
\nmillion compared with $1 million last year, he said.<\/p>\n
Dealers estimate that daily trading volume of the ringgit,
\nincluding both spot and forward contracts, in Singapore could
\namount to as much as $3 billion a day.<\/p>\n
A senior trader with a British bank in Singapore said real
\ninvestment in the region is an insignificant part of the foreign
\nexchange flows into this part of the world.<\/p>\n
\"Most of the flows are short term and speculative in nature,\"
\nhe said.<\/p>\n
Dealers said the surge in interest for the ringgit was due to
\nthe huge volatility in its exchange rate against the dollar. It
\nhas swung from a high of 2.55 ringgit to a low of 2.80 and back
\nto 2.55 against the dollar within the last nine months.<\/p>\n
\"The moves were engineered by Bank Negara and were not due to
\nany economic fundamentals. This wide range in such a short time
\nhas never been seen before and will probably never be seen
\nagain,\" the British bank trader said.<\/p>\n
Malaysia's central bank imposed measures to curb speculation
\nin the ringgit, and at the same time depressed the currency, late
\nin 1993 and then removed the measures earlier this year.<\/p>\n
\"Bank Negara has been instrumental in stirring interest in
\nthese markets. The news and changes were good as they moved the
\ncurrency markets,\" said the chief dealer with the Asian bank.<\/p>\n
Rupiah<\/p>\n
Besides the ringgit, dealers said trading interest and volume
\nin the baht and rupiah had also picked up sharply due to interest
\nrate differentials between these currencies and the dollar.<\/p>\n
\"The play on these two currencies are the interest rates. The
\nrecent move by Indonesia to widen the trading band for the rupiah
\nalso means more volatility,\" said a British trader.<\/p>\n
Bank Indonesia widened the fluctuation band to 30 rupiah from
\n20 rupiah for spot dollar buying and selling with the central
\nbank earlier this week.<\/p>\n
A senior vice president of regional treasuries for an American
\nbank estimated that Southeast Asian currencies now account for
\nabout 15 to 20 percent of daily foreign exchange trading volumes
\nin Singapore.<\/p>\n
Daily foreign exchange trading exceeded $80 billion in 1993,
\nhe said.<\/p>\n
\"Singapore is recognized as the major offshore center for
\nthese emerging currencies. There are now 20 to 25 banks here who
\nare active market makers and another 70 to 80 banks who trade
\nregularly because of their customer requirements,\" he said.<\/p>\n
He said more banks are jumping onto the emerging currencies
\nbandwagon because they think it may be easier to make money in
\nthese currencies compared with trading in the major currencies.<\/p>\n
Dealers said most banks still earn the bulk of their foreign
\nexchange profits from trading in major currencies -- like the
\ndollar\/mark and dollar\/yen -- because of the much larger volumes,
\nbut it has been a difficult year in these markets.<\/p>\n
\"A lot of people have lost money in the majors this year so
\nthey are looking to the emerging currencies,\" said the British
\ntrader.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/exotic-currencies-see-explosive-growth-dealers-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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