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.