Regional bankers prepare to tackle currency crisis
Regional bankers prepare to tackle currency crisis
SHANGHAI (AFP): East Asian and Pacific central bankers began arriving here yesterday on the eve of a key annual meeting as Southeast Asian currencies faced further selling pressure.
Bank of Japan governor Yasuo Matsushita, Bank of Korea governor Lee Kyung-Shik, Hong Kong Monetary Authority chief executive Joseph Yam and Central Bank of the Philippines governor Gabriel Singson were the first to arrive.
Malaysia's Bank Negara governor Ahmad Mohd. Don and Bank Indonesia governor Soedradjad Djiwandono canceled their room reservations, said sources at the Garden Hotel, where the one-day meeting will take place.
It is not clear why Ahmad, who will be represented by his deputy Fong Weng Phak, is not attending the meeting while Soedradjad has remained in Jakarta to attend a meeting of the National Private Banking Association.
Ian Macfarlane, governor of the Reserve Bank of Australia, Bank of Thailand governor Rerngchai Marakanond, and Reserve Bank of New Zealand Governor Don Brash are due later in the day.
Authorities in Singapore declined to name their delegation but Monetary Authority of Singapore managing director Lee Ek Tiengand was widely expected to attend.
As the central bankers made their way to Shanghai for the scheduled meeting, expected to deal with the currency crisis set off by the July 2 float of the Thai baht, speculators renewed their attack.
The Thai baht plunged to 32.16 to the greenback in early Singapore trade from Wednesday's close of 31.30 amid rumors that Bangkok may dismantle the two-tier exchange-rate system which limits access to the baht to offshore players, dealers said.
The baht had dipped to a record low past the 32 level Wednesday as Thai corporate players scrambled to buy the US dollar on fears that the ailing currency could suffer further losses amid poor finance sector results.
The Singapore dollar hit a 32-month low of 1.4782 to the US unit from 1. 4684 overseas as Finance Minister Richard Hu's comments that the currency's value would be set by market demand were taken to mean that monetary authorities will not intervene.
The Malaysian ringgit was dragged down to 2.6545 to the greenback from 2. 6400 and the Indonesian rupiah to 2,620 from 2,585.
Dealers said speculators, who kept a low profile earlier this week returned to the market Tuesday to test the downside of regional units.
Analysts said they believed the meeting would come out with a strong statement against speculative attacks on regional currencies but little action to back it.
Dargah Maher, economist at ING Barings, said: "My guess would be it will be quite heavy on rhetoric and less on action."
With so many regional units under attack, most central banks would be too busy guarding their own currencies to be able to take part in a sustained joint intervention, they say.
Desmond Supple, head of Asian currency research at Barclays (BZW) Global Foreign Exchange, said: "I expect very vociferous verbal support (for regional currencies) but market conditions mitigate against a successful currency market intervention."
Supple said all Southeast Asian economies burdened with current-account deficits were vulnerable to currency weakness, "particularly since regional central banks are attempting to maintain control over interest rates which involves limiting foreign exchange intervention."
A senior Citibank dealer in Asian currencies said: "The meeting is unlikely to come out with any coordinated strategy. I think regional central banks are not used to getting to work like a G-7 kind of meeting. Each has its own set of problems. But you may get a joint statement to calm the market. "
Alex Erskine, economist at Citibank NA in Singapore, said: "The Shanghai central bankers' meeting has got to develop a future strategy.
"I would hope that the conclusion would be a decision to move towards truly floating exchange rates and for the interest rates to be set at the right levels for each.
The central bankers' meeting, a Japanese initiative launched in 1991, is the second such gathering.
Central bank participants are Australia, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore and Thailand.