Asian Central Bank Intervention In FX Markets Likely To Persist

Fitch Ratings has said that official Asian demand for US dollar assets is likely to remain strong. In addressing an audience of local bankers, investors and media at Fitch’s first Asian Regional Seminar in Mumbai, India, Brian Coulton, Senior Director, Sovereigns Group, Asia, elaborated that the need for US current account adjustment has put Asian central banks’ exchange rate policies under intense scrutiny. But Coulton noted that ongoing credit tightening in China, lingering deflationary pressures in Japan and a weak domestic demand outlook in Korea, may limit prospects for a wholesale change in approach to exchange rate policy by the larger players. “While sterilisation efforts remain manageable at this stage, capital inflows will push up inflation and real exchange rates in emerging Asia and along with an improving investment and private consumption outlook in South East Asia these trends may characterise Asia’s contribution to the rebalancing of global demand,” said Coulton.

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