Banks unite against money speculators

Banks unite against money speculators

JAKARTA (JP): The central banks of Indonesia, Malaysia,
Singapore, Thailand, the Philippines and Hong Kong have agreed to
exchange relevant information and experiences in coping with
speculative attacks on their currencies.

The agreement was reached at an informal meeting between
representatives of the six central banks held at the office of
the Hong Kong Monetary Authority in Hong Kong on Saturday.

The meeting, hailed by all the participants as quite useful,
was convened following a massive rush to the dollar in most
Asian emerging markets triggered by investors' fears of Mexican-
style devaluation.

Bank Indonesia (central bank) described the agreement as an
important breakthrough in fighting speculative currency trading
in Asian countries in the future.

In a press release made available to The Jakarta Post
yesterday, the Indonesian central bank said that the meeting,
chaired by the chief executive of the Hong Kong Authority Joseph
Yam, agreed to continue exchanges of information and experiences
on how to cope with currency speculators.

The speculative currency trading hit most Asian countries,
including Indonesia, in the previous two weeks as foreign-fund
managers dumped their portfolio investment and bought the U.S.
dollar on fears of a Mexican-style devaluation.

Bank Indonesia said the Hong Kong meeting also agreed to
exchange relevant information about the types of currency
speculators, how they operate and how they fund themselves.

"Central banks also exchanged views on the appropriate
response including its procedures and control," the statement
said.

Bank Indonesia's Director Paul Sutopo attended the Hong Kong
informal talks.

Bank Indonesia said that in the current market globalization
era, fast flows of massive sums of capital could take place any
where in the world.

Fluctuation

But the inflow of short-term capital deserves a closer
attention as it could not only cause sharp fluctuations in
currency and interest rates but also could disrupt the whole
monetary system, the central bank said.

Bank Indonesia said that the immediate impact of the currency
speculation would be felt by weak financial institutions and
those who have no adequate access to information.

The central bank therefore asked the local banks and non-bank
financial institution to take a lesson from the recent wave of
currency speculations and not to be easily influenced by
misleading rumors about the country's economic condition.

Based on its fundamental indicators, the Indonesian economy is
very much promising, the central bank said.

The economic growth rate rose to seven percent last year from
6.5 percent in 1993, with the inflation falling to 9.24 percent.
The current account deficit is only around two percent of the
Gross Domestic Product (GDP), while the foreign exchange reserves
are substantial enough to finance five months of imports, Bank
Indonesia said.

Mexico devalued its peso on Dec. 20 by 15 percent but its
impact caused the currency to lose nearly 50 percent of its pre-
devaluation value against the greenback.

Foreign-based fund managers unloaded their Indonesian
portfolio investment and bought the U.S. dollar on fears that the
Mexican-style devaluation would also hit the rupiah, forcing the
central bank to inject an estimated US$500 million to defend the
currency.

The dollar rush slowed down early last week following the
massive intervention by Bank Indonesia and assurances from
President Soeharto and key monetary officials that the government
had no any intention to devalue the rupiah and its foreign debts
were well managed. (hen)