Tag Archives | Asian Currency
Finance sector development

“Grexit” and yuan devaluation could put significant pressure on Asian currency pegs

Grexit and yuan devaluation could put significant pressure on Asian currency pegs
Already driving a housing bubble in all major Asian cities from Seoul to Jakarta, significant hot money inflows are what Hong Kong, China and Singapore seek to avoid. However, Greece’s exit from the eurozone coupled with subsequent quantitative easing by the People’s Republic of China (PRC) to jump-start flagging growth could quickly exacerbate this Asian dynamic.

Finance sector development

Fostering exchange rate coordination: the role of an Asian Currency Unit

Asian Currency Unit
Over the past few decades East Asia has become increasingly intertwined economically as the share of interregional trade in total trade has increased sharply across most economies, driven by regional supply chains and production networks. These production networks have also fostered greater investment links, with the production process being broken down into subprocesses within a particular industry. The high degree of economic integration indicates that there may be a case for exchange rate coordination, as exchange rate misalignments may result in loss of competitiveness for a country, possibly leading to an increase in protectionism, which in turn could promote a round of beggar-thy-neighbor devaluations. Large swings in bilateral exchange rates could influence decisions about the location of new and existing investments. In contrast, greater stability in exchange rates would support investment by increasing price transparency and reducing currency-related hedging costs for companies. Finally, sharp exchange rate movements in one currency could affect another country’s ability to maintain a particular exchange rate regime.