Philippines urges cooperation to face currency tensions

Agence France-Presse

Posted at Oct 30 2010 01:30 AM | Updated as of Oct 31 2010 03:59 AM

HANOI - Smaller Asian countries, faced with rocketing exchange rates that risk destabilizing economies, should work together so that they have a bigger voice, Philippines Finance Secretary Cesar Purisima said on Friday.

Like many emerging markets in the region, the Philippines has seen its currency soar against a weak US dollar, making its exports less competitive and inviting a massive inflow of foreign capital.

"We're all concerned that our currencies are appreciating," Purisima told reporters at the Association of Southeast Asian Nations (ASEAN) summit.

"All these countries would have to get together so that they become relevant," he said. "We're small so we are working with ASEAN and hopefully ASEAN will work with the others so that our voice can be relevant."

On Thursday Thailand and the Philippines called for more cooperation between regional central banks to calm the currency tensions.

ASEAN countries have limited tools at their disposal to influence a currency drama that is being played out by China and the US, but in which they are some of the biggest victims.

Washington has long accused China of keeping the yuan artificially low.

Beijing in turn says the Federal Reserve's loose monetary policy risks undermining emerging economies, now grappling with an influx of hot money as investors seek higher returns due to low interest rates in the US and Europe. Capital inflows push Asian currencies higher still and have led to steep gains in stocks and property prices, fuelling fears of inflation and speculative bubbles that could burst if the money exits in haste.

"We are in an unusual situation now where the main developed countries do not have the demand that should drive the world economy and therefore the emerging countries will have to step up," Purisima said.

The "ultimate solution" was for demand to increase in emerging markets, he said.

The peso currently stands at around 43.20 against the US dollar, compared to around 47 earlier this year, Purisima said.

DBS Bank said earlier this month that since January, Asian currencies have strengthened by 6.0 percent on average against the dollar.