Central bankers fail to ease Asia's woes
Central bankers fail to ease Asia's woes
SINGAPORE (Reuter): The statement from Asian central bankers
after their meeting in Shanghai yesterday contained little of
substance, and did not significantly change the somewhat gloomy
outlook for beleaguered Asian currencies.
Analysts said the statement from the "Shanghai Eleven" -- as
they are known in the market -- was a bit of a damp squibb and
would not do much to help, or to stem a recent upturn in hedging
by nervous fund managers with portfolio exposure in the region.
On the other hand, there was nothing in the statement which
will provide the market with an excuse to aggressively sell.
The central bankers said the meeting had agreed to renew a
currency swap accord, which provides short-term liquidity
financing to ease temporary balance of payments needs.
It also said the central banks would work with the
International Monetary Fund (IMF) to study ways to aid members
and recognized the importance of foreign exchange stability.
Regional economies are fundamentally sound, the statement
said.
Financial markets around the region had waited with bated
breath for the outcome of a meeting hailed as the 'G7' of Asia to
see just what the central bankers could come up with to stop the
currency rot.
"As we expected, they have steered a middle course and there
is little magic in what they have said," said Kobus Van Der Wath,
regional head of treasury economics at Standard Chartered in
Singapore.
"In terms of the medium to long term they have done the right
thing, but what we are interested in is Monday morning's opening
and I don't think there is any real factor here that will drag
the (U.S.) dollar down," he said.
"I can see the dollar a little firmer against the regional
currencies next week...but we are talking about 50 basis points
or so. This is not big figure stuff."
The 11 central banks at the Shanghai meeting were Japan, Hong
Kong, Singapore, Malaysia, The Philippines, Thailand, Australia,
New Zealand, South Korea, Indonesia and China.
Taiwan was notable by its absence.
In a separate statement from Kuala Lumpur, foreign ministers
of the Association of South East Asian Nations (ASEAN) said they
had pledged to jointly fight speculators who sold down the
region's currencies.
But analysts were agreed that all-in-all, Friday's statements
did little to change things and expected more of the same in
terms of currency movements.
"This is not going to give the FX market any consolation,"
said Jacquline Ong, regional president at I.D.E.A in Singapore,
in an interview with Reuters Financial Television.
"I expect that in Asia next week the sell-off in the regional
currencies is likely to continue."
In the wake of the Thai crisis which resulted in the effective
devaluation of the baht at the beginning of July, most Asian
currencies have dropped sharply.
This week the losses have been more restrained but
nevertheless the baht has fallen another six percent to 32.00 per
U.S. dollar, the Indonesian rupiah five percent to 2,610.00, the
Malaysian ringgit two percent to 2.6500 and the Philippine peso
two percent to 28.50.
Even the Singapore dollar, which up until now has remained
aloof from the turmoil surrounding it, dropped one percent this
week to 1.4700 per U.S. dollar.
The Hong Kong dollar traded in a range after the HKMA released
figures showing it held HK$569 billion at end June, up 6.4
percent from end December, a move seen as aimed at scaring off
speculators.
The Indonesian rupiah remained depressed below the 2,600 level
to the dollar, but dealers said activity had slowed.