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October 28, 2010
Southeast Asia Seeks Common Currency Stance Before G-20 to Protect Exports
Southeast Asian leaders pushed for greater coordination on currency policies ahead of a Group of 20 summit next month to stave off a drop in exports as U.S. and Chinese measures increase capital flows to emerging markets.
Indonesia, Thailand and the Philippines urged fellow members of the Association of Southeast Asian Nations today to jointly plan a foreign-exchange stance to increase their say on the world stage. Asean’s five biggest economies have seen their currencies rise the most in Asia outside Japan this year.
“We have encouraged Asean to develop a common perspective on the currency situation,” Indonesia’s Foreign Minister Marty Natalegawa told reporters in Hanoi. “We must ensure that there are no inadvertent imbalances caused by efforts by some countries to protect export industries by artificially maintaining currencies at an exceptionally low level.”
Asean will send a representative to the meeting of G-20 leaders in Seoul, where leaders will discuss a plan to avoid “competitive devaluations” among members. Asean countries are meeting in Vietnam’s capital this week along with China, Japan, South Korea, India, Australia, New Zealand, the U.S. and Russia. Link ~ G20 - 2010-2011 ~ Exchange Rates ...G20 -2011 Links
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Coordinated actions would prove more effective than individual policy responses, Philippine President Benigno Aquino spokesman Ricky Carandang told reporters. The Philippine peso has gained 7.1 percent against the dollar, while Thailand’s baht is up 11.1 percent and Indonesia’s rupiah 5.3 percent.
‘Getting Complaints’
“The concern right now is that, moving forward, if currencies like the baht and the peso continue to strengthen export figures might slow down,” Carandang said after Aquino met Thai Prime Minister Abhisit Vejjajiva. “Both countries are getting complaints from their exporters of narrower margins and lower revenues because of the exchange rate.”
China’s efforts to keep the yuan from appreciating and the dollar’s fall has prompted countries such as South Korea, Brazil and Thailand to take steps to weaken their currencies to boost competitiveness. Some countries are considering new measures after G-20 finance chiefs meeting in South Korea agreed Oct. 23 to refrain from weakening currencies to boost exports.
Indonesia, Asean’s largest economy and a G-20 member, wants the 10-nation bloc to have “common ideas” on currency policy so Asean “earns its seat” at the Seoul summit, Natalegawa said.
Indonesia’s central bank will “guard” the rupiah at its fundamental level and buy foreign currencies to control the local currency’s volatility, Central Bank Governor Darmin Nasution said yesterday. Thailand removed a 15 percent tax exemption for foreigners on income from domestic bonds last month, and Finance Minister Korn Chatikavanij warned on Oct. 25 that regulators are “keeping an eye” on speculative inflows.
‘Gyrate’
Bank Negara Malaysia Governor Zeti Akhtar Aziz told Bloomberg Television Oct. 26 she favors a gradual strengthening of the ringgit. The Philippine central bank takes steps so that the peso doesn’t “gyrate in a very wide range,” Governor Amando Tetangco said in an e-mail yesterday.
The stronger currencies may also crimp tourism to Southeast Asia, Asean Secretary-General Surin Pitsuwan told reporters today.
Countries in the region “have to face this prospect of uncertainty and strengthening of their currencies, which will make them less competitive,” Surin said. “They know that they have to make adjustments.”
Exports are equivalent to 54 percent of Asean’s collective gross domestic product, according to the bloc’s statistics. China was its largest trading partner, with two-way commerce reaching $211.31 billion in the first 9 months this year, up 43.7 percent from last year, according to data compiled by Bloomberg.
China has kept the yuan’s rise to about 2 percent since a June pledge to introduce more flexibility, arguing anything other than a gradual appreciation would cause social and economic turmoil. The U.S. Federal Reserve has weakened the dollar by moving toward buying more assets to address unemployment and weak inflation.
http://www.forexlive.com/142898/all/asean-summit-likely-to-spend-much-time-discussing-currencies
