Thailand, Malaysia, Indonesia enter currency pact to counter strong US dollar

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baht-rupiah-ringgitThe central banks of Thailand, Malaysia and Indonesia agreed on a currency cooperation in order to promote the use of their local currencies for trade and investment settlements between the three countries. The move is seen as a reaction to the strengthening of the US dollar in the recent past and a bid to reduce the impact of the emerging economies’ exposure to volatile global markets and the US currency in cross-border trade.

The agreement was signed on December 23 in Bangkok by Governor of Bank Indonesia Agus Martowardojo, Governor of Bank Negara Malaysia Muhammad bin Ibrahimand Governor of Bank of Thailand Veerathai Santiprabhob.

As a result of the cooperation, businesses will benefit from reduced transaction costs and more efficient trade and investment settlements by being able to choose the local currency in which they want to conduct their deal settlements.

The framework is also expected to pave the way for wider use of local currencies in the ASEAN Economic Community and spur further development of the regional foreign exchange and money markets, in support of wider economic and financial integration.

The three-country agreement follows an earlier one signed between the central banks of Malaysia and Thailand in August 2015 and the subsequent introduction of a bilateral currency policy framework in March this year. Indonesia, for its part, had earlier established bilateral currency swap agreements with several countries including China and Australia to reduce dependence on the US dollar.

Increasing volatility in financial markets has been identified as one of the biggest issues faced by several emerging economies along with the rising trade protectionism and capital outflows in the face of rising US interest rates.

Malaysia’s ringgit, which is facing a rout ever since Donald Trump was elected the next president of the US, was down to 4.48 against the greenback earlier in the week, the weakest value in decade. The Thai baht and Indonesia rupiah have also fallen against the US dollar this year.

 

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The central banks of Thailand, Malaysia and Indonesia agreed on a currency cooperation in order to promote the use of their local currencies for trade and investment settlements between the three countries. The move is seen as a reaction to the strengthening of the US dollar in the recent past and a bid to reduce the impact of the emerging economies' exposure to volatile global markets and the US currency in cross-border trade. The agreement was signed on December 23 in Bangkok by Governor of Bank Indonesia Agus Martowardojo, Governor of Bank Negara Malaysia Muhammad bin Ibrahimand Governor of Bank...

Reading Time: 2 minutes

baht-rupiah-ringgitThe central banks of Thailand, Malaysia and Indonesia agreed on a currency cooperation in order to promote the use of their local currencies for trade and investment settlements between the three countries. The move is seen as a reaction to the strengthening of the US dollar in the recent past and a bid to reduce the impact of the emerging economies’ exposure to volatile global markets and the US currency in cross-border trade.

The agreement was signed on December 23 in Bangkok by Governor of Bank Indonesia Agus Martowardojo, Governor of Bank Negara Malaysia Muhammad bin Ibrahimand Governor of Bank of Thailand Veerathai Santiprabhob.

As a result of the cooperation, businesses will benefit from reduced transaction costs and more efficient trade and investment settlements by being able to choose the local currency in which they want to conduct their deal settlements.

The framework is also expected to pave the way for wider use of local currencies in the ASEAN Economic Community and spur further development of the regional foreign exchange and money markets, in support of wider economic and financial integration.

The three-country agreement follows an earlier one signed between the central banks of Malaysia and Thailand in August 2015 and the subsequent introduction of a bilateral currency policy framework in March this year. Indonesia, for its part, had earlier established bilateral currency swap agreements with several countries including China and Australia to reduce dependence on the US dollar.

Increasing volatility in financial markets has been identified as one of the biggest issues faced by several emerging economies along with the rising trade protectionism and capital outflows in the face of rising US interest rates.

Malaysia’s ringgit, which is facing a rout ever since Donald Trump was elected the next president of the US, was down to 4.48 against the greenback earlier in the week, the weakest value in decade. The Thai baht and Indonesia rupiah have also fallen against the US dollar this year.

 

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