Bloomberg News

Barclays’ Desbarres Says Asia Central Banks Curbing Volatility

December 09, 2011

Dec. 9 (Bloomberg) -- Olivier Desbarres, head of foreign- exchange strategy for Asia-Pacific ex-Japan at Barclays Capital in Singapore, comments on intervention by Asian central banks in a press briefing:

Asian central banks “don’t want their currencies weakening aggressively because there is still sticky inflation in the region: Singapore, China, and South Korea in particular. Of course, India is an obvious one. At the same time, they don’t want their currencies appreciating rapidly because we are seeing a global growth slowdown.

“When we speak to the central banks the message we get from them is: ‘we’re not too uncomfortable with the levels of our currencies; what we don’t like is volatility.’ So a lot of the measures that you see in Asia are to some extent designed to minimize day-to-day, week-to-week volatility.

“For them to have their currencies broadly trading in line with their trade partners, they don’t have to intervene in the foreign-exchange market aggressively. They are on a comfortable holding pattern.

“In the risk-on scenario, you would expect Asian central banks to control the pace of appreciation. In a very extreme scenario, they might even revisit capital controls. Central banks are more willing to use their reserves when they feel they are being picked on for one-off non-fundamental reasons.”

--Editor: Andrew Janes

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To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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