Stabilizing Asia's currencies

Stabilizing Asia's currencies

Over the weekend, finance ministers participating in the Asia-
Europe Meeting in Kobe reached an agreement to study exchange
rate regimes for emerging markets and developing countries. Japan
intends to promote the Asian currency basket system, which would
link the currencies of emerging economies to the U.S. dollar, the
yen, and the euro.

Three and a half years have passed since the delinking of the
Thai baht and the U.S. dollar triggered the Asian currency and
financial crisis, and Asian economies are now on the road to
recovery. However, a downturn in the U.S. economy could once
again trigger a sell-off of Asia's currencies. One of the urgent
tasks confronting Asia is to build an international framework
that can respond to, and perhaps even prevent the recurrence of a
currency crisis.

Japan is promoting a plan to link the dollar, euro and yen
with the currencies of emerging economies. France has already
praised the plan. The actual weighting of the three currencies in
the basket would be based on trade volume within the region, and
other indicators. This approach would help to prevent wild
currency fluctuations, and hamper attempts to speculate in the
currency of a particular country.

-- The Mainichi Shimbun, Tokyo