Tuesday, January 3, 2012

Asia's double-edged currency sword

[ via Reuters ] 2 Jan

The roller-coaster ride for Asian currencies, which saw only the yen and yuan post significant gains for the year against the U.S. dollar, is set to continue in 2012.

While Japan actively sought to stem the yen's rise - drawing U.S. criticism last week - China intervened to ensure the yuan ended the year at a new high. Both currencies appreciated roughly 5 percent in 2011 against the dollar.

The opposite approaches illustrate a dilemma facing Asian policymakers as they try to smooth out foreign exchange rate volatility, which shows no sign of abating in the new year. If the currency is too strong, exports get more expensive. Too weak, and imported inflation spikes and domestic buying power fades.

Read more:  Reuters


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