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South Korea and Indonesia move on currencies | South Korea and Indonesia move on currencies |
(40 minutes later) | |
The Bank of Korea has become the latest central bank to step into the money markets in a bid to stabilise its currency. | The Bank of Korea has become the latest central bank to step into the money markets in a bid to stabilise its currency. |
The Korean won has declined by 10% against the US dollar in the past month, and the bank said it was taking appropriate steps to stem the falls. | The Korean won has declined by 10% against the US dollar in the past month, and the bank said it was taking appropriate steps to stem the falls. |
The move follows a similar action by the Indonesian central bank on Thursday to shore up the rupiah. | The move follows a similar action by the Indonesian central bank on Thursday to shore up the rupiah. |
Analysts said big currency fluctuations were a threat to these economies. | Analysts said big currency fluctuations were a threat to these economies. |
"It's not a desire to produce a stronger currency, it's just about putting a cap on the decline," Sean Callow of Westpac Bank told the BBC. | "It's not a desire to produce a stronger currency, it's just about putting a cap on the decline," Sean Callow of Westpac Bank told the BBC. |
"These countries remember what problems were there, when they had a weak currency," he added. | "These countries remember what problems were there, when they had a weak currency," he added. |
Economic impact | |
The sharp falls in currencies has come at a time when the Asian economies have been trying to control rising consumer prices. | |
High rates of inflation have become a hot political topic in many of the region's economies, and a threat to their growth. | |
Analysts said a dip in the currency values has added to those problems. | |
"The lower your currency goes, the higher the cost of imports becomes, and that adds to price growth," Arjuna Mahendran of HSBC Private Bank told the BBC. | |
To make matters worse, a weak currency also hurts the purchasing power and dents consumer demand. | |
Mr Mahendran said the combination of these factors was making the central banks wary. |