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Asia spent $50B last month to defend currencies against high US dollar

Asia spent $50B last month to defend currencies against high US dollar

This September, governments across Asia reportedly spent around $50 billion in foreign-exchange reserves, the highest amount since March 2020, to defend their currencies against the continuously rising US dollar.

Data analysis firm, Exante Data, estimates that emerging Asian countries spent almost $30 billion with dollar sales in the cash market in just September. This figure does not include China. If Japan is included, the figure reaches $50 billion.

In the first nine months of this year, total dollar sales in the region reached roughly $89 billion, including Japan, becoming the most active period in forex expenditures since 2008, as per data from central banks and other government authorities.

This rise comes after the Bloomberg Dollar Spot Index, measuring the greenback against a bunch of other major currencies, traded at an all-time high amid aggressive rate hikes globally. This has led to a lower value of stockpiles of other currencies in the portfolios of central banks. 

According to Exante, Japan saw $20 billion in sales last month, while South Korea saw around $17 billion, as per the data from the countries’ central banks. Other net sellers of dollars include Thailand, Taiwan, the Philippines, and Hong Kong.

Alex Etra, Senior Strategist, Exante, stated that the currencies of these nations are under pressure from the high interest rates.

Market interventions, however, will continue, especially with the Japanese yen hitting a 30-year low this week. Many now speculate a possible action by the authorities after the country picked up activity in September.

Asian countries have often resorted to foreign-exchange market intervention in the past to curb or slow down volatility, and weaken their currencies. But the September dollar sales saw the volume reach the early days of the pandemic back in 2020. 

Etra suggested that the drawdown in reserve may be due to declining valuations and the broader reallocation of assets. However, a major reason behind it is central banks selling reserves for cash.

Meanwhile, global reserves stockpiles have declined over $1 trillion this year, the biggest drop since the data compilation began in 2003, reaching less than $12 trillion.

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Pursuing her professional career as a content writer for over two years now, Pooja Sharma is endowed with a post-graduate degree in English Literature. The articles that she writes are a balanced blend of her ever-growing love of language and the technical expertise that she has gained over the years. Currently Pooja pens insightful articles for Newsorigins and numerous other websites, covering subjects such as business, finance, and technology.