A TD Securities calculations, using compiled data from Bloomberg, has revealed that the Policymakers of the region have more than $5.5 trillion worth of foreign exchange. Back in 2021, this stockpile increased to $5.9 trillion.
Currently, the focus has been shifting to possible steps the authorities in the region might take since the stronger fixings and the verbal warnings could not arrest the downswing in their currencies. While exports keep benefiting as the currencies weaken, a sustained stretch of depreciation risks triggers outflows of capital.
“Asian central banks have the firepower from their FX reserves like last year to intervene if they choose to,”
said Alex Loo, Singapore-based Asia FX & macro-strategist at TD.
“We think jawboning efforts may suffice for now.”
So far, authorities in different countries, such as Japan and China, have been using verbal intervention to defend their currencies. On the other hand, the Reserve Bank of India has taken a step further, selling dollars to prevent the Indian Rupees from hitting an all-time low. Bank of Indonesia is also said to be in the market.
The top finance officials of Japan kept the investors guessing on Wednesday by declining to reassure whether Tokyo was stepping into the markets to prop up the Japanese currency, Yen. Finance Minister Shunichi Suzuki revealed last month that he had a strong sense of urgency regarding the Yen, and their authorities would not rule out any possibilities against FX moves.
“Asia continues to follow an eclectic approach to managing exchange-rate pressures, including the usage of FX reserves as the first line of defense in case of continued outflows,”
– according to Sonal Varma, chief economist India & Asia ex-Japan at Nomura Holdings Inc.
India, the Philippines, and Thailand will keep utilizing reserves to curb excessive swings in the currencies.