KL calls for establishment of SE Asian forex market

KL calls for establishment of SE Asian forex market

KUALA LUMPUR (AFP): Malaysia's central bank chief Saturday called for the setting up of an Southeast Asian market for financial instruments and currencies to accommodate increasing cross-border flows of capital.

"We need active intra-regional foreign exchange and financial markets to promote the investment of a rising volume of cross- border capital and working funds," Bank Negara governor Ahmad Mohd. Don said.

Capital must move and funds must be raised, and a regional market should complement the national market in resource allocation, he said.

The potential exposure of cross-border investment must also be hedged effectively, he told bankers from Thailand, Indonesia, Singapore and Malaysia attending the first Forex Southeast Asia forum in Kuching, capital of Malaysia's eastern Sarawak state.

The forum was recently organized to develop new financial instruments in the region and support the spread of information on foreign exchange and money market management, banking officials said.

"The necessary safeguards, however, must be put in place first to ensure successful development of a viable and sustainable regional financial market and minimize payment and settlement risks in multilateral cross-border dealings," Ahmad Don said.

Analysts said the caution exercised by Malaysia's central bank was expected, having incurred some US$6 billion in losses in international foreign exchange dealings over the last two years.

Those losses led to the resignation of Ahmad Don's predecessor, Jaffar Hussein, and a ban since April on all forward contracts in international currencies. The bank now deals in foreign exchange on a spot basis, officials said.