April 25, 2024

Falling Markets Cause Warnings Throughout Asia

The financial market throughout the globe has seen historic declines since the US Federal Reserve started increasing interest rates about six months ago. Financial authorities all over Asia have been increasing efforts to stave off a sharp fall.

Central Banks Step In

On Wednesday, South Korea became part of an increasing list of interventions after the country’s central bank announced that it will buy up to $2.1 billion of the government’s debt. Taiwan has gone ahead with floating its currency control and officials have given signs that there could be a ban on selling stock short if it becomes necessary. Meanwhile, China has given instructions that funds should refrain from selling large shares and increased its fixing of the Yuan by 25 days.

Governments across the world are dealing with the economic fallout of the US Federal Reserve’s monetary policy pattern. And the Dollar’s rapid increase is taking capital away from almost every other thing. Every attempt made in Asia to control the market is not yielding so many results.

The Head of Emerging Markets at Singapore’s TD Securities, Mitul Kotecha, has said that government and central bank interventions will only slow down the decline of the assets in Asia. Higher rates from the US Feds, the strong US Dollar, and low housing in the region indicate that there will be pressure in the coming weeks.

Varying Results

Financial authorities in Japan, India, and Indonesia have also stepped in to push up their currencies. But it looks like the efforts are not sufficient. The Japanese Yen is close to exchanging at 145 to the Dollar, which was the cause for the latest round of intervention while the onshore Chinese Yuan has reached its weakest level since 2008.

The Chief Asian Economist with Sumitomo Mitsui Asset Managers, Tetsuji Sano, said it is going to be quite difficult for the Chinese central bank to buy the Yuan when the bank is planning to reduce monetary pressure. Buying the Yuan would be counterproductive as it will take currency away from the market. Sano said further that China might take some actions that would reduce the Yuan’s decline and discourage capital flight, such as making it more difficult for residents in China to buy foreign currency.

The plan in South Korea has been a bit successful with the three-year bond making a gain after the country’s central bank announced it was going to buy government debts. The Kospi shed losses and closed at 2.5% farther down the line.

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