Published: October 8 2009 15:09 | Last updated: October 8 2009 15:09
Asian central banks intervened heavily in the currency markets on Thursday to slow the slide of the US dollar amid growing concern about the potential impact on the region’s export driven economies.
Traders said most of the Asian central banks had been buying US dollars, with the Bank of Korea among the most active following a round of intervention by Seoul earlier in the week.
Other central banks identified by traders as significant buyers of US dollars included Thailand, Malaysia, Taiwan and Singapore, which is a frequent market participant because of its managed currency regime.
In Hong Kong, the Chinese territory’s central bank said it had injected HK$8.525bn into the financial system to prevent the currency from rising beyond its fixed trading band against the US dollar.
The central bank intervention appeared to have been triggered by a fresh wave of dollar selling by investor concerns about weak consumer credit figures in the US. Upward pressure on Asian currencies increased as Australia released strong employment growth numbers only two days after becoming the first G20 central bank to raise interest rates since the beginning of the global financial crisis.
The dollar came under fresh pressure across the board on Thursday. The euro rose 0.4 per cent to $1.4745 against the US currency, while the yen rose 0.2 per cent to Y88.47. Against a basket of traded currencies the dollar fell 0.6 per cent to 76.008, close to the lowest level of the year.
However, traders said the central bank intervention appeared to be aimed at controlling the pace at which the US dollar declines rather than an attempt to stop Asian currencies appreciating.
“I don’t think this is just notional, but I don’t think they are massively intervening either,” said Adam Gilmour, a Citigroup managing director who is co-head of the bank’s Asia Pacific foreign exchange and derivatives businesses.
“Ithink they are just trying to slow down the movement. I don’t get the impression that anybody is trying to draw a line in the sand.”
Ashiok Chawla, India’s finance secretary, said that New Delhi would not intervene to weaken the rupee ”as long as the movement is not volatile and takes place based on fundamentals within a sort of range and moves two-ways.”
There was confusion about the intentions of the Bank of Japan, which appeared not to have entered the market, although the yen strengthened to Y88.22 to the dollar in Tokyo, from Y88.61 in New York on Wednesday.
In Taiwan, analysts and traders said there were clear signs that the central bank had intervened to keep the island’s currency below the psychological barrier of 32 Taiwan dollars to the US dollar. The Taiwan currency closed in Taipei at T$32.137.
In Bangkok the Thai central bank confirmed that it had intervened to soften the rise of the baht, which has appreciated 4.5 per cent so far this year to hit a 14-month high of Bt33.29 to the dollar on Thursday.
“Some days its strength is beyond economic fundamentals,” Suchada Kirakul, an assistant governor at the Bank of Thailand, told reporters. “The baht is strong and we are still taking care of it.”
In was unclear whether the Indonesian central bank had intervened in response to pressure from prominent local business people for action to prevent the rupaih from rising too far too fast .
Copyright The Financial Times Limited 2009
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