'Asia must step up financial cooperation'
Asia must step up financial cooperation to cope with large capital inflows that are putting the squeeze on the region's most open economies, the head of the Asian Development Bank said on Friday.
By Agencies |
KYOTO: Asia must step up financial cooperation to cope with large capital inflows that are putting the squeeze on the region's most open economies, the head of the Asian Development Bank said on Friday.
Many Asian nations are seeing an appreciation of their currencies as low interest rates in countries such as Japan and Switzerland encourage investors to borrow cheaply there to invest in fast-growing developing economies.
"Small open economies in Asia like Thailand or Malaysia, certainly their economies are affected by a large inflow of capital from outside," ADB president Haruhiko Kuroda said ahead of the bank's annual meeting in Kyoto.
"This is a real challenge for any small, open economy. One way (to cope) is financial cooperation among small open economies to mitigate the impact of fluctuations of capital flows," he said.
Regional currencies such as the Thai baht, Indonesian rupiah, Singaporean dollar and Philippine peso have all appreciated sharply against the dollar recently, making life tougher for exporters in the region.
Thailand has taken some of the most draconian steps to curb the baht's rise, imposing capital controls in December which required 30 percent of all incoming investment to be withheld for up to one year.
Kuroda also urged China to embrace further currency flexibility to allow an appreciation of the yuan.
"I think the Chinese authorities have made the currency gradually more flexible and I think this trend would and should continue. Greater exchange rate flexibility would be in the interest of the Chinese economy," he said.
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