Dollar tumbles: Asian countries interveneSubmitted by SteveMT on Thu, 10/08/2009 - 14:20
This is real and happening right now!
(WSJ) The U.S. dollar continued to tumble against most Asian currencies Thursday, prompting a wave of foreign-exchange intervention by central banks in South Korea, Taiwan, the Philippines and Thailand seeking to limit damage to their export industries.
Traders said the dollar selloff is unlikely to fade soon, given the prospect for a long period of low U.S. interest rates to support a sluggish U.S. economy and increasing signs central banks in Asia will begin tightening monetary policies in the months ahead.
Surprisingly strong employment data in Australia bolstered speculation the Reserve Bank of Australia — which Tuesday became the first among Group of 20 central banks to raise rates — will deliver another increase before the end of the year. The news pushed the Australia dollar up sharply, and intensified buying of Asian currencies against the U.S. dollar.
“Investors need little encouragement to extend selling of dollars, but received two further green lights today in the form of ongoing weak U.S. consumer credit and a stunningly strong Australian employment report,” said Patrick Bennett, a strategist with Societe Generale.
The U.S. dollar’s downside against Asian currencies is “being slowed by intervention, but consolidation or rallies are opportunities to establish or add to shorts,” he said.
It was the latest effort by Asian monetary authorities in recent weeks to temper rallies in their currencies, which have been driven higher by investors fleeing the U.S. dollar and placing bets that Asia will lead the global economic recovery. While stronger Asian currencies could help to contain inflation as the region’s economy gathers steam, exports could suffer, leaving countries vulnerable when fiscal stimulus measures are eventually withdrawn.
The Bank of Thailand confirmed it intervened, saying the baht’s strength since early this month isn’t justified by fundamentals.
“The baht has appreciated a little too rapidly compared with our fundamentals. … The central bank has tried to take care of the baht so that it doesn’t get too strong,” Assistant Governor Suchada Kirakul told reporters.
The U.S. dollar was recently trading at 33.29 baht, above its intraday low of 33.25 baht.
In the other countries, the central banks didn’t make public statements.
Asian countries step in to support dollar
By Kevin Brown in Singapore
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