LexisNexis(TM) Academic - Document
Copyright 2005 The Financial Times Limited
Financial Times (London, England)
July 22, 2005 Friday
London Edition 1
SECTION: RENMINBI REVALUATION; Pg. 10
LENGTH: 727 words
HEADLINE: Neighbouring nations take cue from Beijing ASIAN CURRENCIES:
BYLINE: By JOHN BURTON, KATHRIN HILLE, DAVID IBISON, JUSTINE LAU and VICTOR MALLET
DATELINE: HONG KONG, SINGAPORE and TAIPEI
BODY:
If there were any doubt about how dependent Asia has become on the Chinese economy, it is likely to have been dispelled by the predictable and almost immediate response to Beijing's 2.1 per cent revaluation of the renminbi last night.
Malaysia instantly copied China, abandoning its dollar peg and adopting a managed float against a basket of foreign currencies before ringgit trading restarts today. The Singapore dollar rose by about 2 per cent against the US dollar following China's announcement, although it eased after apparent intervention by the central bank.
Japan put itself on alert to intervene in the currency markets, but the finance ministry said the revaluation was within Japan's expectations.
The dollar weakened immediately against the yen from Y112 to Y110, but remained well above the Y105 level that the finance ministry set as an unofficial limit when it intervened last year to slow the appreciation of the Japanese currency and protect the export-led economic recovery.
Hong Kong said it would keep its peg against the US dollar, but other Asian nations either let their currencies rise or are expected to do so today. China - sucking in imports of components and raw materials and exporting low-cost manufactured goods - is now the largest trading partner of several Asian economies.
In many cases Asian governments have hidden behind Beijing's skirts in the dispute with the US over exchange rates, allowing China to absorb US criticism while they benefit from the same currency undervaluation against the US dollar to boost exports. But as China revalues, Asian currencies are likely to rise as well.
Much depends on whether China continues on a path of gradual revaluation and whether Asian domestic economic activity begins to take over from exports as the main driver for growth.
"In the near term, today and in the next week or so, you're going to see lots of flows into the currencies of Asia," said Jonathan Anderson, chief Asia economist for UBS. Later, however, "the currencies are going to settle down".
"Over the longer term, it's not going to be the renminbi that makes these currencies rise, it's going to be domestic recovery."
Goldman Sachs said it had long argued that the renminbi peg was a stumbling block to real exchange rate adjustment in Asia. It called yesterday's move "highly significant".
Malaysia is likely to be among those affected by Beijing's decision. The export-led Malaysian economy has benefited from a weak currency since it imposed the currency peg at MDollars 3.8 to the US dollar in September 1998 in response to the Asian financial crisis.
Some industries welcomed the news, which means lower import costs on components for the car industry and machinery for other manufacturers. "This is good news for us since our biggest cost is fuel, which is denominated in US dollars," said Tony Fernandez, chief executive of AirAsia, Malaysia's budget airline.
Abdullah Badawi, prime minister, said the value of the ringgit "will be decided by the market fundamentals, but I don't think it will be too far from the present exchange rate". The ringgit is considered 5-10 per cent undervalued against the US dollar.
Malaysia will allow the ringgit to float in a tight band against a currency basket, a system similar to Singapore. It did not give a range or say what currencies were included in the trade-weighted basket.
Meanwhile, Stephen Ip, Hong Kong acting financial secretary, said its currency peg would remain. "The government has no intention at all to change the linked exchange rate system which has served Hong Kong well for more than 21 years and has been the anchor of our economic stability."
Joseph Yam, chief executive of the Hong Kong Monetary Authority, added that the reform of the renminbi regime would benefit Hong Kong's economy as the territory's exports to the mainland would become more competitive.
Taiwan's central bank said it would not make changes to its managed float regime after China's move. "The market will decide the exchange rate of the new Taiwan dollar," said Chou A-ting, director-general of the bank's foreign exchange department. "We will intervene only if seasonal factors, sudden developments or irrational market behaviour impact the currency." Reporting by Victor Mallet and Justine Lau in Hong Kong, John Burton in Singapore, David Ibison in Tokyo and Kathrin Hille in Taipei
LOAD-DATE: July 21, 2005
Financial Times (London, England)
July 22, 2005 Friday
London Edition 1
SECTION: RENMINBI REVALUATION; Pg. 10
LENGTH: 727 words
HEADLINE: Neighbouring nations take cue from Beijing ASIAN CURRENCIES:
BYLINE: By JOHN BURTON, KATHRIN HILLE, DAVID IBISON, JUSTINE LAU and VICTOR MALLET
DATELINE: HONG KONG, SINGAPORE and TAIPEI
BODY:
If there were any doubt about how dependent Asia has become on the Chinese economy, it is likely to have been dispelled by the predictable and almost immediate response to Beijing's 2.1 per cent revaluation of the renminbi last night.
Malaysia instantly copied China, abandoning its dollar peg and adopting a managed float against a basket of foreign currencies before ringgit trading restarts today. The Singapore dollar rose by about 2 per cent against the US dollar following China's announcement, although it eased after apparent intervention by the central bank.
Japan put itself on alert to intervene in the currency markets, but the finance ministry said the revaluation was within Japan's expectations.
The dollar weakened immediately against the yen from Y112 to Y110, but remained well above the Y105 level that the finance ministry set as an unofficial limit when it intervened last year to slow the appreciation of the Japanese currency and protect the export-led economic recovery.
Hong Kong said it would keep its peg against the US dollar, but other Asian nations either let their currencies rise or are expected to do so today. China - sucking in imports of components and raw materials and exporting low-cost manufactured goods - is now the largest trading partner of several Asian economies.
In many cases Asian governments have hidden behind Beijing's skirts in the dispute with the US over exchange rates, allowing China to absorb US criticism while they benefit from the same currency undervaluation against the US dollar to boost exports. But as China revalues, Asian currencies are likely to rise as well.
Much depends on whether China continues on a path of gradual revaluation and whether Asian domestic economic activity begins to take over from exports as the main driver for growth.
"In the near term, today and in the next week or so, you're going to see lots of flows into the currencies of Asia," said Jonathan Anderson, chief Asia economist for UBS. Later, however, "the currencies are going to settle down".
"Over the longer term, it's not going to be the renminbi that makes these currencies rise, it's going to be domestic recovery."
Goldman Sachs said it had long argued that the renminbi peg was a stumbling block to real exchange rate adjustment in Asia. It called yesterday's move "highly significant".
Malaysia is likely to be among those affected by Beijing's decision. The export-led Malaysian economy has benefited from a weak currency since it imposed the currency peg at MDollars 3.8 to the US dollar in September 1998 in response to the Asian financial crisis.
Some industries welcomed the news, which means lower import costs on components for the car industry and machinery for other manufacturers. "This is good news for us since our biggest cost is fuel, which is denominated in US dollars," said Tony Fernandez, chief executive of AirAsia, Malaysia's budget airline.
Abdullah Badawi, prime minister, said the value of the ringgit "will be decided by the market fundamentals, but I don't think it will be too far from the present exchange rate". The ringgit is considered 5-10 per cent undervalued against the US dollar.
Malaysia will allow the ringgit to float in a tight band against a currency basket, a system similar to Singapore. It did not give a range or say what currencies were included in the trade-weighted basket.
Meanwhile, Stephen Ip, Hong Kong acting financial secretary, said its currency peg would remain. "The government has no intention at all to change the linked exchange rate system which has served Hong Kong well for more than 21 years and has been the anchor of our economic stability."
Joseph Yam, chief executive of the Hong Kong Monetary Authority, added that the reform of the renminbi regime would benefit Hong Kong's economy as the territory's exports to the mainland would become more competitive.
Taiwan's central bank said it would not make changes to its managed float regime after China's move. "The market will decide the exchange rate of the new Taiwan dollar," said Chou A-ting, director-general of the bank's foreign exchange department. "We will intervene only if seasonal factors, sudden developments or irrational market behaviour impact the currency." Reporting by Victor Mallet and Justine Lau in Hong Kong, John Burton in Singapore, David Ibison in Tokyo and Kathrin Hille in Taipei
LOAD-DATE: July 21, 2005
posted by Eastlaw at Friday, July 22, 2005
0 Comments:
Post a Comment
<< Home