Dollar's fall may dent SE Asian exports
Dollar's fall may dent SE Asian exports
SINGAPORE (AFP): The booming Southeast Asian economies may have their export competitive edge dented by the weakening U.S. dollar even as most of their currencies appreciated against the greenback in Singapore foreign exchange trade, some analysts said yesterday.
"We must remember that the U.S. is still a major export market for the region and interest rate increases in the U.S. following the greenback's steep decline will slow down the American economy's growth," warned Chan Kok Peng, an economist with Smith New Court (S) Pte. Ltd.
Most Southeast Asian countries manage their currencies against the U.S. dollar, which directly gear external accounts to its vagaries, analysts said.
Southeast Asia's two largest export markets are the United States and the European Union.
Manufactured goods make up the bulk of domestic exports to these markets -- almost all for Hong Kong and Singapore, 74 percent for Malaysia, and about 40 percent for Indonesia, with commodities being important to mainly for Indonesia and the Philippines.
Analysts have argued that the U.S. Federal Reserve Board (Fed) should raise interest rates if it wants to turn the dollar around.
"Now, it looks like Washington has to resort to interest rate increases that could see more funds flowing into the U.S. and stem the dollar's decline," said Phoon Kok Fui, the regional head of Yamaichi Merchant Bank's equities research department.
The Fed has already raised rates seven times in the past year in an effort to cool off the overheating economy and contain inflation from rising.
Chan said the yen's appreciation against the U.S. dollar as well as against most regional currencies would not lead to the traditional shift of Japanese industries to the region.
"Unless there is a complete hollowing out, I don't see many of them shifting their operations to the region," Chan said, adding that most of the relocation of Japanese production had reached some sort of saturation point.