FX Intervention Trifecta: Korea, Malaysia, Thailand

♠ Posted by Emmanuel in ,, at 12/31/2010 12:57:00 PM
Oh, will the combatants ever cease from "international currency war" so we can celebrate the holidays in relative peace? With the US dollar doing another of its habitual swoons due to much-lamented American free money policies, Asian economies not particularly keen on shooting themselves in the foot are having to wade into the open market and buy the godforsaken and hapless greenback to stem the appreciation of their currencies. From the Wall Street Journal comes this snippet:
Central banks in South Korea, Malaysia and Thailand are believed to have intervened in foreign-exchange markets Thursday as Asian currencies surged against the dollar on optimism about the region's economic outlook, underscored by strong economic data from China and signals that the yuan will continue to strengthen.

Taiwan, meanwhile, unveiled measures to buttress its banking system against rapid movements in foreign capital, the latest Asian economy to introduce stricter regulations to control the risks posed by such capital flows...

In Kuala Lumpur, traders said Malaysia's central bank was suspected of buying dollars to curb a rise in the ringgit, which hit a three-month high Thursday. Bank Negara Malaysia may have bought dollars at around 3.0810-3.0820 ringgit per dollar, dealers said. The dollar was at 3.0846 ringgit in late trade.

Traders in Seoul said they suspected the Bank of Korea entered the market, buying more than $500 million at several intervals between 1,135 and 1,140 won per dollar. The dollar closed at 1,134.80 won, bringing the won's gains against the dollar to 2.6% for the year.

In Bangkok, the dollar was at 30.15 baht in late trade—down from 30.16 baht late Wednesday—with suspected buying by the central bank around that level to limit the downside, two dealers said.

In Taipei, which has been trying to temper gains in the New Taiwan dollar—a favorite among investors seeking exposure to China, given Taiwan's increasingly close economic ties to the mainland—Taiwan's central bank announced new measures to control capital flows. Starting Saturday, local banks will have to set aside 90% of foreign investors' new deposits as reserves, a leap from the current level of 9.775%.
So the usually America-friendly Martin Wolf believes Asian countries cannot win in the US-led "international currency war." I don't see any sign of many of these Asian countries relenting just yet, though. 2011 promises to be more of the same unless something major changes the outlook of these nations. For, Bernanke's chopper will surely be strafing us with greenback emissions from greater heights--of that you can be as certain of as death and taxes.