Shanghai meeting hailed as Asian 'G-7'

Shanghai meeting hailed as Asian 'G-7'

SINGAPORE (Reuter): A meeting of Asian central bankers in
Shanghai on Friday is being hailed as the region's 'G-7' by
foreign exchange dealers in the wake of weeks of the recent
currency turmoil.

In a still jittery market keen to hold U.S. dollars rather
than regional currencies, the meeting could be something of a
watershed given the possibility of central bank cooperation on
foreign exchange intervention.

"This meeting will be like the G-7 equivalent for this
region," said Chiang Yao Chye, economist at CIBC Wood Gundy in
Singapore.

"The big issue for the market at the moment is this meeting in
Shanghai as there is the possibility of concerted intervention or
a statement that they are willing to join hands to support
currencies."

The meeting is being hosted by the People's Bank of China and
the participants are due to arrive in Shanghai on Thursday
evening.

Those attending include Japan, Hong Kong, Singapore, Malaysia,
The Philippines, Thailand, Australia, New Zealand, South Korea,
China and Indonesia.

It is a one-day meeting followed by a sight-seeing trip on
Saturday before the bankers leave on Sunday.

However, sources in Shanghai say there are no plans to allow
media access to the meeting and no briefing or communique is
scheduled.

Regional central banks have helped each other out in the past.
As the Thai crisis intensified in May, the Monetary Authority of
Singapore intervened in the market to help shore up the sagging
baht.

On Tuesday, Japanese Finance Minister Hiroshi Mitsuzuka said
Japan would keep in close contact with Asian economies such as
Indonesia, Malaysia and Thailand to promote the stability of
currency markets in the region.

Although Mitsuzuka said "that does not necessarily mean we are
in a special cooperative alliance", statements such as this are
enough to frighten the market given the huge foreign exchange
reserves held by the Bank of Japan.

"Although we've seen some big moves lately the actual selling
behind them has been light and in some cases extremely light,"
said one Singapore-based trader.

"This meeting is certainly a golden opportunity for some major
league jawboning from these guys about intervention and
cooperation. In markets this thin it will have an impact."

Traders said if there were anything forthcoming from the
Friday meeting, it would most likely be after Asian market hours
and give the market the whole weekend to digest any news.

But region currencies could react to any news during European
and U.S. time zones, they said.

The need for fresh regional cooperation on currencies was
thrown into sharp relief on Tuesday when Malaysia reported an 8.8
billion ringgit, or 12.5 percent, fall in foreign exchange
reserves to 61.9 billion in the first two weeks of July.

"This was a very nasty figure and just goes to show that in
parts of the region there simply isn't the firepower to protect
currencies if there is another panic," said one Singapore based
trader.