ASEAN central banks renew currency swap accord

ASEAN central banks renew currency swap accord

SHANGHAI (Reuter): Central banks from the Association of South East Asian Nations (ASEAN) signed an agreement yesterday to renew a currency swap accord after a one-day meeting in Shanghai.

The renewed currency swap accord provides short-term liquidity financing to ease temporary balance of payments needs, ASEAN bank officials said.

A member country in need of liquidity can exchange its local currency for U.S. dollars provided by other members under the agreement. Members include Indonesia, Malaysia, the Philippines, Singapore and Thailand.

"Under this agreement, ASEAN countries made efforts to stabilize their currencies," China central bank vice governor Chen Yuan told reporters.

"We regard this as a positive step," said Chen, vice governor of the People's Bank of China.

The agreement renews the dormant US$200 million ASEAN Swap Agreement by one year and will take effect from August 5.

The one-year renewal will allow members to consider if there are more effective arrangements to meet ASEAN requirements, a central bankers' statement said.

"The successful implementation and renewal of the ASEAN Swap Arrangement over the last 20 years testified to the continuing strong spririt of ASEAN cooperation in both monetary and banking matters," the statement said.

It added that members were actively exploring means of enhancing existing arrangements.

Chen said China's central bank supported currency stability in the region but declined to hive details of how it would actually do that.

ASEAN members had been expected to renew the dormant $200 million currency stabilizing scheme in August.

Ministers of the Southeast Asian nations had said last March they would review the role of the inactive mechanism, taking into account the dramatic changes in foreign currency markets since it was first created in 1977.

Analysts had been looking to the meeting of central bankers in Shanghai as the Asian regional equivalent of the G7 grouping and had hoped for some agreement on cooperation to stabilize regional currencies that have come under speculative attacks on foreign exchange markets.

Thailand was the most vulnerable economy to the speculative onslaught and the nation was the first in the region to allow a de facto devaluation of its currency, the baht, with a managed float on July 2. Since then the baht has lost about 20 percent of its value.

The Philippines has also been forced to effectively devalue the peso and Indonesia has allowed the rupiah to float more freely. Malaysia is also believed to have used large amounts of its foreign exchange reserves to defend the ringgit.