Indonesia Wants Asean Version of the Euro Currency

Jakarta Globe, Daniel Ten Kate | October 28, 2010             

Hanoi. Indonesia is pushing fellow members of the Association of Southeast Asian Nations to adopt a common currency stance ahead of next month’s Group of 20 summit to aid progress on a broader policy initiative.

Indonesia wants to replace the rupiah
with a common Asean currency. 

“We have encouraged Asean to develop a common perspective on the currency situation,” Foreign Minister Marty Natalegawa told reporters in Hanoi today. “We must ensure that there are no inadvertent imbalances caused by efforts by some countries to protect export industries by artificially maintaining currencies at an exceptionally low level.”

Asean will send a representative to the meeting of G-20 leaders in Seoul, where leaders will discuss a plan to avoid “competitive devaluations” among members. Asean countries are meeting in the Vietnamese capital this week along with China, Japan, South Korea, India, Australia, New Zealand, the United States and Russia.

China’s restraint of the yuan and the falling dollar has prompted countries such as South Korea, Brazil and Thailand to take steps to weaken their currencies to boost competitiveness.

Some countries are considering new measures after G-20 finance chiefs meeting in South Korea agreed Oct. 23 to refrain from weakening currencies to boost exports.

Indonesia, Asean’s largest economy and a G-20 member, wants the 10-nation bloc to have “common ideas” on currency policy as the issue will become “more and more relevant” before the Seoul summit, Marty said. Asean’s five biggest economies have seen their currencies rise the most in Asia outside Japan this year.

Indonesia’s rupiah has gained 5 percent this year and touched 8,896 on Oct. 26, the strongest since June 2007. The central bank will “guard” the rupiah at its fundamental level and buy foreign currencies to control the local currency’s volatility, Central Bank Governor Darmin Nasution said on Wednesday.

Thailand removed a 15 percent tax exemption for foreigners on income from domestic bonds last month. Thai Finance Minister Korn Chatikavanij warned on Oct. 25 that regulators are “keeping an eye” on speculative inflows.

Bank Negara Malaysia Governor Zeti Akhtar Aziz told Bloomberg Television Oct. 26 she favors a gradual strengthening of the ringgit. The Philippine central bank takes steps so that the peso doesn’t “gyrate in a very wide range,” Governor Amando Tetangco said in an e-mail yesterday.

China has kept the yuan’s rise to about 2 percent since a June pledge to introduce more flexibility, arguing anything other than a gradual appreciation would cause social and economic turmoil. The U.S. Federal Reserve has weakened the dollar by moving toward buying more assets to address unemployment and weak inflation.

Bloomberg