Central banks in Asia are tapping into their stockpiles to bolster their weakening currencies against the rising US dollar.
Thai reserves have slid to $221 billion as of mid-June. That is the lowest in more than two years. Monthly figures show that Indonesia’s stash is at the smallest since November 2020, and reserves in South Korea and India are at their lowest in more than a year. Meanwhile, Malaysia’s stockpile has fallen the most since 2015.
Learning from the 1997 Asian financial crisis, central banks have been accumulating dollars to help defend their currencies during periods of wild market swings.
Thailand and Indonesia are among those which have pledged to reduce volatility in their currencies. The Bangko Sentral ng Pilipinas said it is letting the market determine the peso’s value against the dollar and is only intervening to curb volatility.
High-yielding emerging-Asia currencies may see little reprieve soon. They may need to continue to support their deteriorating external finances while investors are running for shelter spurred by the Fed’s tightening moves, according to strategists at Goldman Sachs.
Already, regional currencies are hovering at multi-year lows: the Philippine peso on Monday slumped to its weakest since 2005, while the Indian rupee declined to a record low last week.
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