MUMBAI/BANGKOK: Policymakers of emerging Asian economies on Tuesday, Oct 5 voiced concerns over hot money that is pushing up their currencies, with India and Thailand saying they were looking at steps to control the flow of funds.
South Korea also warned investors it might impose further limits on forward trading, a move analysts said was likely aimed at slowing the won's appreciation.
More governments around the world are moving to keep their currencies from appreciating as investors, turning their backs on low interest rates in developed economies, pour money into higher-yielding markets.
Tuesday's moves come after Brazil on Monday doubled a tax on foreigners' purchases of local bonds and days before a meeting of Group of Seven finance ministers at which currencies are likely to be a main topic of discussion.
The United States has said China distorts the global economy by undervaluing its currency, but many emerging economies blame ultra-low interest rates in rich countries for fund inflows to their markets.
A Reserve Bank of India deputy governor warned the central bank was considering measures to deal with an influx of foreign fund flows, as the partially convertible rupee hovered near its highest in 5-'' months.
"It is becoming a larger global problem because of the imbalance, that there is so much of liquidity and the returns are skewed towards emerging markets," RBI Deputy Governor Subir Gokarn said at a private equity conference.
"So it is emerging as a potential threat and we are clearly thinking of ways in which we can deal with it," he said. [ID:nSGE69408B]
WORRIED ABOUT CURRENCY'S RISE
The Bank of Thailand said it was a little worried about the baht's rise to a 13-year high and was studying ways that flows of funds could be controlled.
"Imposing measures is a serious matter, and we need to study both the good and bad points to see who will win or lose," Wongwatoo Potirat, a central bank senior director with responsibility for financial markets, told reporters.
The baht showed little reaction to the comments.
In Seoul, the Bank of Korea and the Financial Supervisory Service said they would jointly inspect foreign exchange derivatives positions at banks operating in the country later this month and may impose fresh measures depending on the results.
In principle, the plan is not unusual because the authorities have already said they would carry out occasional inspections when they unveiled restrictions on currency derivative positions at banks in June.
Still the won, which hit five-month highs on Monday despite continued intervention by the authorities, fell as the move was seen as aimed at curbing the currency's strength, while bond futures <0#KTB:> reversed gains.
"I interpret it as an attempt to use regulation to deter banks from speculating on the won's appreciation," said Tim Condon, head of Asia research at ING in Singapore.
Brazil's finance minister said on Monday the world was in an "international currency war" as governments manipulated their currencies to improve their export competitiveness.
The comments come ahead of a meeting of G7 finance ministers at which they will discuss economic growth issues and inflexible currencies, according to Canadian Finance Minister Jim Flaherty, who will chair the informal gathering on Oct. 8 in Washington.
Currencies are also expected to be discussed at an annual International Monetary Fund meeting, also to be held in Washington this week.
Japan spent 2.1 trillion yen ($25.18 billion) on currency intervention in the month to Sept. 28 after it intervened in the market for the first time in six years on Sept. 15 amid worries a surging yen would derail a fragile economic recovery. - Reuters
South Korea also warned investors it might impose further limits on forward trading, a move analysts said was likely aimed at slowing the won's appreciation.
More governments around the world are moving to keep their currencies from appreciating as investors, turning their backs on low interest rates in developed economies, pour money into higher-yielding markets.
Tuesday's moves come after Brazil on Monday doubled a tax on foreigners' purchases of local bonds and days before a meeting of Group of Seven finance ministers at which currencies are likely to be a main topic of discussion.
The United States has said China distorts the global economy by undervaluing its currency, but many emerging economies blame ultra-low interest rates in rich countries for fund inflows to their markets.
A Reserve Bank of India deputy governor warned the central bank was considering measures to deal with an influx of foreign fund flows, as the partially convertible rupee
"It is becoming a larger global problem because of the imbalance, that there is so much of liquidity and the returns are skewed towards emerging markets," RBI Deputy Governor Subir Gokarn said at a private equity conference.
"So it is emerging as a potential threat and we are clearly thinking of ways in which we can deal with it," he said. [ID:nSGE69408B]
WORRIED ABOUT CURRENCY'S RISE
The Bank of Thailand said it was a little worried about the baht's
"Imposing measures is a serious matter, and we need to study both the good and bad points to see who will win or lose," Wongwatoo Potirat, a central bank senior director with responsibility for financial markets, told reporters.
The baht showed little reaction to the comments.
In Seoul, the Bank of Korea and the Financial Supervisory Service said they would jointly inspect foreign exchange derivatives positions at banks operating in the country later this month and may impose fresh measures depending on the results.
In principle, the plan is not unusual because the authorities have already said they would carry out occasional inspections when they unveiled restrictions on currency derivative positions at banks in June.
Still the won
"I interpret it as an attempt to use regulation to deter banks from speculating on the won's appreciation," said Tim Condon, head of Asia research at ING in Singapore.
Brazil's finance minister said on Monday the world was in an "international currency war" as governments manipulated their currencies to improve their export competitiveness.
The comments come ahead of a meeting of G7 finance ministers at which they will discuss economic growth issues and inflexible currencies, according to Canadian Finance Minister Jim Flaherty, who will chair the informal gathering on Oct. 8 in Washington.
Currencies are also expected to be discussed at an annual International Monetary Fund meeting, also to be held in Washington this week.
Japan spent 2.1 trillion yen ($25.18 billion) on currency intervention in the month to Sept. 28 after it intervened in the market for the first time in six years on Sept. 15 amid worries a surging yen would derail a fragile economic recovery. - Reuters
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