ASEAN ministers' meeting to discuss forex volatility
ASEAN ministers' meeting to discuss forex volatility
BANGKOK (Reuter): Southeast Asian finance ministers meet in Thailand this weekend and are expected to explore ways of countering any future volatility of their currencies that are tied to a bullish U.S. dollar.
Government officials and analysts said recent sharp swings in regional currencies and related capital outflows would figure high on the agenda of the first finance ministers' meeting of the Association of South East Asian Nations (ASEAN) in Phuket, southern Thailand.
Market analysts said they expected the seven-member group to discuss possible cooperative moves in cushioning any further pressure on their currencies, taking the lesson from recent sporadic attacks on the Thai baht.
"I think the clearest issue is how would countries in the region deal with a crisis situation such as that happening to the Thai baht over the past two to three weeks," said Wong Yit Fan, Standard Chartered Bank's Southeast Asian chief economist.
"One of the topics is cooperation on regulating capital flows and stabilizing our currencies. We would probably discuss measures to achieve this but it is premature to say what we are going to do," said Pongpanu Savetaroon, director of Thailand's international economic policy division.
ASEAN currencies that are tied to the U.S. dollar have appreciated sharply against the yen and mark in the past year in tandem with the greenback at a time when regional exports face serious slowdowns.
Asked if the ministers would touch on the effect of the strong dollar on regional currencies when they discuss macroeconomic issues, a senior Malaysian official said: "I believe anyone can raise that issue under that agenda item."
Analysts said they expected the ministers to review the market's flight from the baht in early February which created a severe liquidity crunch and forced Thailand to increase short- term domestic interest rates in a bid to curb capital outflows.
Lawrence Hatheway, chief economist at UBS Securities (Singapore) Pte: "Clearly in the back of their minds must be some sort of cooperation that might arise in the event that there was a balance of payments crisis ... (or) a funding crisis for one of the countries that might be in deficit.
"It's a discussion about what sort of measures, what sort of instruments, might be available to them to help one another out that clearly could be under discussion here," he added.
But Pongpanu said any ASEAN cooperation to boost currency stability should not be interpreted as economic weakness.
"This does not mean that ASEAN members are facing problems. Every member is currently strong. Even the Philippines, once viewed as a sick man, now stands solid," he said.
Other members of the grouping are Thailand, Singapore, Malaysia, Brunei, Vietnam and Indonesia.
Hatheway of UBS Securities warned against high expectations of the one-day meeting. "I think it would be premature to expect too much out of this ... in terms of new policy initiatives for the region as a whole.
"I don't think there will be any concrete resolutions to any particular problem they are facing, but an opportunity to get together as a club to think about how to organize themselves for future discussions ..."
Senior ASEAN officials said the ministers would on Saturday sign two broadly worded agreements on cooperation in finance, banking, capital market development, customs procedure, insurance, and taxes.