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.