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)