US$ weakness cuts risk of forex shocks

THE managing director of Singapore's central bank said the US dollar's steady slide and the rise of Asian currencies were reducing the risk of a sudden currency shock, The Wall Street Journal reported yesterday.

'The US dollar has come down quite a bit, Asian currencies have gone up, the Japanese and European economies are growing and in China and many other Asian economies, you see domestic consumption increasing,' Mr Heng Swee Keat, the managing director of the Monetary Authority of Singapore (MAS), said in an interview with the newspaper.

'So I see that as a good development, and if we can continue with those changes, the risks of a sharp change in the exchange rates would be that much diminished.'

Mr Heng also said he expected downward pressure on the US dollar to continue in the long term, although that would be tempered by the attractiveness of United States financial markets to international investors, the Journal said.

'In terms of the longer-term trends, if you look at the fundamental economic performance, that must change the value of the US dollar vis-a-vis the rest,' the newspaper quoted him as saying.

It said he added that the 'depth of financial markets' and innovations in the US financial system would offset that trend by keeping assets attractive for foreign buyers. Asked if he viewed the US dollar's decline as benign, he replied: 'Yes'.

REUTERS