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.