Asian monies down on concern central banks will sell
Asian monies down on concern central banks will sell
Christina Soon, Bloomberg/Singapore
Asian currencies fell on speculation the region's central banks will sell them to protect exporters after the Wall Street Journal said South Korea, China and Japan voiced concern about the dollar's decline.
"The recent dollar depreciation is huge and that may affect Korean and other countries' exports," Go You Sun, an economist at Dongwon Securities Co., said in Seoul. "Most Asian central banks will try to boost the dollar's value."
The won fell 0.1 percent to 1,048.20 against the dollar as of 4 p.m. Seoul time, its biggest drop since Nov. 19, according to Seoul Money Brokerage Services Ltd. The currency has climbed almost 14 percent this year, making it the world's third-best performer after the Polish zloty and South Africa's rand.
Taiwan's dollar slid 0.2 percent to NT$32.205, according to Taipei Forex Inc. The Singapore dollar declined 0.2 percent to S$1.6417.
South Korean President Roh Moo Hyun, Prime Minister Junichiro Koizumi of Japan and China's Premier Wen Jiabao came to an "understanding" on the dollar's slide when they met privately at the Association of Southeast Asian Nations summit in Laos, the Journal reported.
Koizumi said they should jointly try to stabilize currencies, the newspaper reported after the weekend meeting.
Asian currencies, bar the Sri Lankan rupee, rose against the dollar in the past month, with the Korean won having biggest monthly gain since it rebounded from its slump during the Asian financial crisis, prompting government officials to threaten dollar buying to prevent the erosion of export earnings.
South Korea's Deputy Finance Minister Chin Dong Soo yesterday said won gains are "too steep." The ministry is working closer with the central bank and the government will take "more active measures" to curb the appreciation of the currency, he said.
The won had a monthly gain of 6.4 percent, its biggest since July 30, 1998. The gains in November arose partly as exporters such as LG Electronics Inc., concerned the currency would rise further, exchanged their foreign-currency profits. A rising won saps the foreign-exchange proceeds companies get from their earnings abroad.
Taiwan's central bank may try to stem currency gains because of the threat to growth and exports, the Commercial Times reported on Nov. 27, without saying where it obtained the information.
Jan Lambregts at Rabobank said quickening inflation may deter central banks from selling their currencies.
"Countries may be worried about inflation, with high oil and commodity prices," said Lambregts, head of Asia Pacific research in the treasury department of Rabobank in Singapore. "They will be less keen to intervene" and buy dollars "like they did one, one and a half years ago when inflation was less of a problem."
Currencies also fell on speculation China won't adjust its fixed exchange rate soon. Chinese Premier Wen on Nov. 28 said speculation about when the country may change the yuan's peg to the dollar makes it harder to alter the currency system.
China needs "a stable macroeconomic environment, a normal market mechanism and a healthy financial system" before it alters the peg, Premier Wen said at the Asean summit in Vientiane, Laos.