Zhitong Finance APP learned that since Federal began to increase borrowing costs six months ago, global financial markets have been turbulent, and more and more Asian economies have been interfering in the foreign exchange market.
On Wednesday, the Bank of South Korea announced that it would purchase sovereign debt worth $2.1 billion, joining the ranks of interfering in the foreign exchange market.
Governments around the world are struggling to cope with the consequences of the Federal Reserve's aggressive rate hikes , and the rapid appreciation of the US dollar has pulled capital from almost every other area. So far, the move to control the Asian market has achieved little convincing results. "Intervention will only help slow down the decline in Asian assets, not reverse the decline," said Mitul Kotecha, head of emerging market strategy at TD Securities in
, Singapore . "Rising U.S. interest rates, strengthening the dollar, and relatively low real interest rates across Asia suggest that pressure will continue in the coming weeks."
Indonesian , Japanese and Indian authorities also intervened directly to support their currencies. But these measures seem to be insufficient.
yen is still close to the 1 dollar versus 145 yen mark. Last week, the Japanese government and the Bank of Japan announced exchange rate intervention after the yen fell below the 145 mark for the first time in 24 years.
The South Korean government is relatively more successful in intervening in the market. Three-year bonds rose after the Bank of Korea said it would buy government bonds. However, the South Korean benchmark index KOSPI index closed down 2.45% on Wednesday.
Bank of America 9 survey showed that there are more global fund managers taking lower than normal risks than ever before, so there is growing doubt that increasing intervention will be effective. Despite more measures to curb market panic, Wednesday was one of the worst days of the year for Asian credit markets, with the MSCI Asia-Pacific index falling to its lowest point since April 2020.
Intervention is a balanced move for policy makers. Too little or too late may make it feel that officials are unable to cope with volatility in financial markets, which may further spread to the economic sector. But excessive intervention will weaken people's confidence in market freedom.
Nomura believes that a constraint may come from the declining foreign exchange reserves in Asia. This could force Asian central banks to find other ways to support their currencies, potential measures include forcing exporters to sell foreign exchange gains, limiting trade accounts, and taking steps to promote capital inflows.
