Asia buys slumping US dollars
ASIAN central banks bought US dollars yesterday to weaken their own currencies, as the slumping greenback threatened their export-driven economies.
The nations, mainly located in South East Asia, are already struggling with the tepid US recovery and weak demand for their exports from the world’s largest economy.
But they have been doubly hurt because their currencies have appreciated against the dollar.
The Asian central banks that are intervening in currency markets by buying dollars include South Korea, Hong Kong, Taiwan, Thailand, the Philippines and possibly Indonesia.
“Stronger currency hurts exports and growth, and so emerging market policymakers are doing their best to prevent excessive gains,” said Win Thin, senior currency strategist at Brown Brothers Harriman & Co.
Despite the intervention, the greenback hit one-year lows against a raft of regional currencies. The dollar index, which tracks its value against a basket of six main currencies, hit a 14-month low in New York trading.
There was also an indication that Russian banks bought as much as $4bn (£2.5bn) this week.
And Jean-Claude Trichet, European Central Bank president, issued a warning about the euro’s strength yesterday and said that authorities on both sides of the Atlantic would “co-operate as appropriate”.