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Asian countries should enhance co-op in currency swaps

By Ji Peijuan (People's Daily)

08:52, January 04, 2012

As the value of the U.S. dollar has remained stable since late December, certain Asian economies have gradually stopped selling off their dollar assets, and the exchange rates of certain currencies such as the RMB are beginning to stabilize.

Analysts said that the euro zone has not worked out a clear solution to its debt crisis, and the outlook for the U.S. economic recovery remains uncertain, so the United States and European economies will still drag down the Asian economy. In the short term, the U.S. dollar will remain strong, and Asian currencies will likely continue to depreciate.

Asian currencies likely to experience further depreciation

Xie Dongming, an economist at OCBC Bank in Singapore, said that most Asian currencies are likely to have a further depreciation in the short term. Future exchange rate changes will mainly depend on whether the Asian economy will maintain steady growth and whether the U.S. economy will maintain stable recovery after the second quarter of 2012.

Xie added that the Asian economy would reach a turning point in the second quarter, which may lead to the appreciation of Asian currencies.

Asian countries should strengthen cooperation

The future of Asian currencies will depend on changes in the above mentioned factors. Xie believes that due to the European sovereign debt crisis, European bank deleveraging, and some uncertainties in the first half of 2012, the U.S. dollar, as a safe haven, may continue to appreciate. Asian countries may start selling off their dollar assets again if their currencies suffer a new round of depreciation.

Due to the instability of the U.S. dollar, central banks of many Asian countries are reducing their U.S. dollar reserves and changing the U.S. dollar into euro or other currencies. Experts generally believe that the U.S. dollar proportion in the foreign exchange reserves of every country will further decrease, but the declining process will be very long. The U.S. dollar will still maintain its status as a main reserve currency.

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Leave your comment1 comments

  1. Name

Mishra,India at 2012-01-042.50.231.*
I think India will also agree on currency swap ,provided Chinese open more sectors for Indian companies to do business in China.At present,though the bilateral trade is 60 billion $ but its largely imports for India.

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