REGIONAL e-FX PERSPECTIVE


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wealth funds. Tese enable countries like Singapore, Malaysia, Indonesia and South Korea to both manage their currencies if, as earlier this year, they feel they have become overvalued and also to invest in foreign assets to protect their value against local market downturns. Nonetheless fear of capital flows causing economic stress do persist in a subliminal way.


Te best example of how currencies are managed is the Singapore Dollar. Te Monetary Authority of Singapore (MAS) explains the position very clearly, “Te objective of Singapore’s exchange rate policy has always been to promote sustained and non-inflationary growth for the Singapore economy. MAS manages the Singapore dollar against a basket of currencies of Singapore’s main trading partners and competitors. Te trade-weighted exchange rate is allowed to fluctuate within a policy band, and where necessary, MAS conducts direct interventions in the foreign exchange market to maintain the exchange rate within this band. Te exchange rate policy path and the band are regularly reviewed to ensure that they remain consistent with underlying economic conditions. Information pertaining to the policy band, composition of the currency basket, weighting system, or money market operations are not disclosed to the public.”


Singapore as well the other major economies in the region each manage their currencies and reserves very carefully. Informal regulation is to a significant degree, a fact of life. Meanwhile in Europe and North America no discussion of the future capabilities of financial markets is free of the “R” word, yet it is early days as far as South East Asia is concerned when it comes to OTC forex products.


Shankar Hari


“We have seen growth of anywhere between 20% and 40% year-on-year in the amount of foreign exchange business that is conducted via the electronic channels,”


“People are looking to see what happens in Europe and North America,” says JP Morgan’s Shanker Hari. “Nobody wants to impose restrictions just for the heck of it. Moreover from here when we look west at what they do, we see that many of the problems that the world finds itself with were not made in South East Asia but in Europe and the US. People will wait


76 | january 2012 e-FOREX


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