Philippines and Singapore sign forex accord
Philippines and Singapore sign forex accord
SINGAPORE (AFP): Singapore and the Philippines signed a
repurchase agreement here yesterday enabling them to draw on each
other's reserves as part of a regional effort to stabilize the
foreign-exchange market.
The agreement was signed by Gabriel Singson, governor of the
Bangko Sentral ng Pilipinas, and Lee Ek Tieng, managing director
of the Monetary Authority of Singapore (MAS), the city-state's de
facto central bank.
The MAS said the agreement will provide "an alternative source
of immediate liquidity which either institution can draw on,
whenever required."
"By this, the two monetary authorities will gain additional
flexibility in the management of their exchange rate policies," a
statement said.
It added that the signing of the agreement "illustrates the
growing cooperation and goodwill between the two agencies."
The accord marked another milestone in the ongoing
normalization of ties between the two countries, whose relations
hit an all-time low after the March 1995 hanging of a Filipina
maid convicted of a double-murder in Singapore.
The agreement was along the lines of "repos" signed by the MAS
in recent months with counterparts from Indonesia and Thailand.
The Philippines has signed repos with Hong Kong, Malaysia,
Thailand and Indonesia.
Under a repo -- short for repurchase arrangement --
signatories may borrow foreign exchange from each other with U.S.
treasury bonds as collateral in order to arm themselves with
enough resources to fight off speculators attacking their
currencies.
The monetary authorities of Hong Kong, Indonesia, Australia,
Malaysia and Thailand also signed similar repos in November.
In remarks to the press last week, Singapore Finance Minister
Richard Hu said the repos would send a signal to the market that
there was a widening pool of ready credit available to maintain
regional currency stability.
Singapore's foreign exchange reserves stood at US$69.2
billion, one of the world's highest, at the end of 1995. The
Philippines' foreign reserves stood at $5.9 billion.
Pressure
Some Southeast Asian currencies have been under pressure from
speculators since early 1995 following the Mexican peso crisis,
which shook confidence in the economies of emerging markets.
Rising current-account deficits in fast-growing regional
economies have also exposed their currencies to attack.
Despite the mushrooming of repos in the region, analysts say
market forces will remain the primary force in setting exchange
rates, and that countries in the region must pay attention to
economic fundamentals.
Singapore and Hong Kong have signed agreements with Tokyo to
intervene in stabilizing the dollar-yen exchange rate on behalf
of the Bank of Japan, using the latter's reserves, in order to
stave off another surge by the yen.
Dealers say the intervention level has been set at 104 yen to
the dollar. The greenback was trading around 106.47 yen in midday
Singapore trading yesterday.
Jim Wolf, the U.S. coordinator for Asia-Pacific Economic
Cooperation (APEC) forum affairs, told Singapore's Business Times
last week that Washington was against concerted action to
maintain "artificial" exchange rates.
"Countries can get into trouble, or risk getting in trouble,
if they try to maintain artificial rates," he said.