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.