Published November 5, 2010
Asian officials gird for stronger currencies, asset-price inflation
They blame Fed's expanded monetary stimulus for threatening to escalate an inflow of capital into the region
ASIA-PACIFIC officials are preparing for stronger currencies and asset-price inflation as they blamed the US Federal Reserve's expanded monetary stimulus for threatening to escalate an inflow of capital into the region.
Chinese central bank adviser Xia Bin said Fed quantitative easing is 'uncontrolled' money printing, and Japan's Prime Minister Naoto Kan cited the US pursuing a 'weak-dollar policy'.
The Hong Kong Monetary Authority warned the city's property prices could surge and Malaysia's central bank chief said nations are prepared to act jointly on capital flows.
'Extra liquidity due to quantitative easing will spill into Asian markets,' said Patrick Bennett, a Hong Kong-based strategist at Standard Bank Group Ltd. 'It will put increased pressure on all currencies to appreciate; the yuan in particular has been appreciating at a slower rate than others.'
The International Monetary Fund last month urged Asia-Pacific nations to withdraw policy stimulus to head off asset-price pressures, as their world-leading economies draw capital because of low interest rates in the US and other advanced countries.
Yesterday's reactions of regional policy makers reflect the international ramifications of the Fed's decision on Wednesday to inject US$600 billion into the US economy.
Most Asian currencies rose against the US dollar after the Fed's move, led by a 0.5 per cent climb in the Taiwanese dollar and 0.2 per cent gain in the South Korean won. New Zealand's currency reached a 29-month high, and Australia's dollar touched its strongest level since 1982. The MSCI Asia Pacific index of stocks advanced to the highest level since July 2008.
People's Bank of China adviser Xia, writing in the Finance News newspaper yesterday, said US policy makers have a conflict between making policy for the domestic economy and accepting responsibilities that come with being the issuer of the international reserve currency.
China should counter the US through regional currency alliances, speeding international use of the yuan and seeking stability in exchange rates through the Group of 20, which holds a summit next week, Mr Xia later told reporters in Beijing.
China raised interest rates for the first time since 2007 last month, and has limited the yuan to less than a 2 per cent gain versus the US dollar since June.
Asian currencies have climbed against the dollar this year as the region's growth outpaces the rest of the world. Regional central banks from China to India and Australia have raised interest rates to curb inflation pressure, while countries including South Korea and Indonesia have adopted measures to slow the flow of speculative money.
'Our country will actively consider implementing capital control measures to improve the macro-economy,' Kim Ik Joo, a director general of South Korea's finance ministry, said in a telephone interview yesterday.
'Now that the US has announced its plans on quantitative easing, don't you think there will be an influx of capital going into emerging markets?'
Emerging economies expressed displeasure at the Fed's move, making any substantive deal on global imbalances and currencies at next week's G-20 meeting in Seoul even less likely.
A senior Indian finance official, who spoke on condition of anonymity, said that while the US had a right to stimulate its own economy, others would also serve their own interests and said that any deal on currencies during the G-20 Summit had to be a 'win for both the blocs'.
'And that begs a political solution and that's why we are all looking to Seoul,' he added. -- Bloomberg, Reuters
Asian officials gird for stronger currencies, asset-price inflation
They blame Fed's expanded monetary stimulus for threatening to escalate an inflow of capital into the region
ASIA-PACIFIC officials are preparing for stronger currencies and asset-price inflation as they blamed the US Federal Reserve's expanded monetary stimulus for threatening to escalate an inflow of capital into the region.
Chinese central bank adviser Xia Bin said Fed quantitative easing is 'uncontrolled' money printing, and Japan's Prime Minister Naoto Kan cited the US pursuing a 'weak-dollar policy'.
The Hong Kong Monetary Authority warned the city's property prices could surge and Malaysia's central bank chief said nations are prepared to act jointly on capital flows.
'Extra liquidity due to quantitative easing will spill into Asian markets,' said Patrick Bennett, a Hong Kong-based strategist at Standard Bank Group Ltd. 'It will put increased pressure on all currencies to appreciate; the yuan in particular has been appreciating at a slower rate than others.'
The International Monetary Fund last month urged Asia-Pacific nations to withdraw policy stimulus to head off asset-price pressures, as their world-leading economies draw capital because of low interest rates in the US and other advanced countries.
Yesterday's reactions of regional policy makers reflect the international ramifications of the Fed's decision on Wednesday to inject US$600 billion into the US economy.
Most Asian currencies rose against the US dollar after the Fed's move, led by a 0.5 per cent climb in the Taiwanese dollar and 0.2 per cent gain in the South Korean won. New Zealand's currency reached a 29-month high, and Australia's dollar touched its strongest level since 1982. The MSCI Asia Pacific index of stocks advanced to the highest level since July 2008.
People's Bank of China adviser Xia, writing in the Finance News newspaper yesterday, said US policy makers have a conflict between making policy for the domestic economy and accepting responsibilities that come with being the issuer of the international reserve currency.
China should counter the US through regional currency alliances, speeding international use of the yuan and seeking stability in exchange rates through the Group of 20, which holds a summit next week, Mr Xia later told reporters in Beijing.
China raised interest rates for the first time since 2007 last month, and has limited the yuan to less than a 2 per cent gain versus the US dollar since June.
Asian currencies have climbed against the dollar this year as the region's growth outpaces the rest of the world. Regional central banks from China to India and Australia have raised interest rates to curb inflation pressure, while countries including South Korea and Indonesia have adopted measures to slow the flow of speculative money.
'Our country will actively consider implementing capital control measures to improve the macro-economy,' Kim Ik Joo, a director general of South Korea's finance ministry, said in a telephone interview yesterday.
'Now that the US has announced its plans on quantitative easing, don't you think there will be an influx of capital going into emerging markets?'
Emerging economies expressed displeasure at the Fed's move, making any substantive deal on global imbalances and currencies at next week's G-20 meeting in Seoul even less likely.
A senior Indian finance official, who spoke on condition of anonymity, said that while the US had a right to stimulate its own economy, others would also serve their own interests and said that any deal on currencies during the G-20 Summit had to be a 'win for both the blocs'.
'And that begs a political solution and that's why we are all looking to Seoul,' he added. -- Bloomberg, Reuters