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Asian Central Banks Defy G7, Keep Supporting $

Manila Bulletin, February 10, 2004 | Go to article overview

Asian Central Banks Defy G7, Keep Supporting $


SINGAPORE (Dow Jones) China and other Asian countries, rebuffing a call by the industrial powers to let the regions currencies rise, Monday bought dollars and signaled they remain intent on curbing their currencies gains.

Finance chiefs of the Group of Seven nations called Saturday for more flexibility in exchange rates a veiled push for China, Taiwan and South Korea in particular to let their currencies rise against the dollar and take some pressure off the surging euro.

But Taipei and Seoul followed G7 member Japan in intervening again in the currency markets Monday, traders said, and indicated they dont intend to let rising local currencies price their exporters out of competition. Chinas central bank strongly denied a report that it will alter the yuans peg to the dollar in the next couple of months to let the Chinese currency appreciate.

"Its a fantasy to believe they (Asian central banks) will change policies overnight and decide to stay out of the foreign exchange markets after the G7," said an American bank trader in Taipei.

Investors will likely continue pushing Asian currencies higher in the coming days and weeks to test Asian central banks willingness to defy the G7, traders said. Market participants expect central banks and finance ministries throughout the region to continue putting up a fight, but they largely predict the regions currencies will keep grinding higher against the beleaguered dollar.

The dollar rallied briefly in Asia after G7 finance ministers and central bankers, meeting in Boca Raton, Fla., criticized "excess volatility and disorderly movements" in the currency markets and sought "more flexibility in exchange rates."

Market participants view the statement to mean the G7 the US, Japan, Germany, France, the U.K., Italy and Canada, as well as the European Central Bank think the euro has risen enough and want Asian authorities to stop intervening to keep their currencies weak, and thus their exports cheap.

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