Monday, January 22, 2007

Asain Central Bank warn against Capital Inflows.

According to Reuters News.

Asian central bank governors on Monday warned against risks from growing capital flows into the region, a phenomenon they said could be the biggest challenge they face because of the impact on currency fluctuations and economic policies.

"It is, and will surely be, the most difficult task for any monetary authorities to maintain the stability of foreign exchange rates, the free flow of capital and the independence of monetary policy simultaneously," Bank of Japan Governor Toshihiko Fukui told a symposium held to mark the 10th anniversary of the region's currency crisis.

This statement comes on the heels of the Bank of Thailand implimenting capital controls to slow down the Baht's rise. The region is "hot" due to improved macroeconomic factors prompting forgign investors to invest.

The downside to to much investment is apprciation of the currency that would hurt the regions exports.

The Asian currencies are abit weaker this morning. Led by the Yen. I would assume these currencies are being used as funding instruments against other higher yielding currencies.

Good Luck and Good Forex trading.


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