East Asian currencies are anything but stable viewed against the dollar: the Thai baht recently topped a 13-year high – and the yen and ringgit have both outpaced the baht’s rise so far this year. Viewed against each other, of course, these appreciating currencies are more stable.
New research challenges the habit of viewing all currencies against the dollar. It goes on to suggest that “considerable regional currency stability” can be achieved in east Asia if countries target the same basket of currencies as each other – even with no “explicit co-operation”.
China’s currency policy between mid-2006 and mid-2008 should be seen in this light, the paper argues; the simple view of the renminbi against the dollar does not explain the facts nearly as well. “The RMB behaved in this two-year period as if it were managed to appreciate gradually over time against its trade-weighted basket of currencies,” argue Guonan Ma and Robert N McCauley of BIS. Read more
Central banks in the east Asia Pacific region are planning closer co-operation managing their liquidity requirements, as each bank’s ability to provide liquidity “may be limited”. Some banks lack confidence that their liquidity management procedures could cope with renewed stress in the money markets. This from a study presented at last week’s EMEAP meeting, which ended on Friday.
That some of the 11 central banks lack confidence in their liquidity management is implied in the study’s executive summary: Read more
East Asian central bankers are to meet in Sydney from Wednesday to Friday this week, focusing on international regulatory issues and inflation.
There’s plenty of common ground: East Asia has the highest concentration of rate-raising central banks in the world. Australia, New Zealand, South Korea, Malaysia and Thailand have already begun raising, and the Philippines is expected to start soon. Indonesia, Singapore, China and Hong Kong all show signs of recovery. Japan – the final member of the 11-country forum – will probably be the only participant more worried by deflation than inflation at this Executives’ Meeting of East Asia-Pacific central banks (Emeap). Read more