Central Bank Foreign Exchange

A speculative attack on the Thai currency, baht, its devaluation and then a concerted offensive on other currency chart in South East Asia in the past six months from February 2007 to June 2007 have changed the entire complexion of the regional economy. In this course, the economic situation and the stock markets in South East Asia have changed drastically. A speculative attack on the Thai currency, baht, and its devaluation by the Government/Central Bank and then a concerted offensive on other currencies in South East Asia have changed the entire complexion of the regional economy.

Though some Governments still insist that their economic fundamentals are strong and that the GDP growth remains on track, the depreciation or devaluation of the currency, as also the free float of some currencies, has created a host of problems. It all started with the ailing Thai economy, where foreign speculators found it difficult to accept the fact that the baht was still being sustained at the 1999s rate of 24 plus to a U.S. dollar. Thus they launched the offensive in June.

The Thai Government and the Central Bank decided to fight it off and, in the bargain, spent precious foreign exchange reserves - according to market estimates, $ 5 billions was spent to ward off two attacks before the decision to devalue the currency on July 2 was taken. Then came the free fall.

After tasting such success in Bangkok, the speculators decided to try their luck in the Philippines, where they found basic weaknesses in an externally rosy economy. Thus, the Philippine peso was the next victim. The response was somewhat similar. The country's Central Bank attempted to defend the currency for a week and then informed the President that it could not hold the reins any longer. The peso too was floated and sunk to new depths. Just as the Association of South East Asian Nations was holding its annual conferences in Malaysia, the focus of the global operators, masterminded basically by powerful American financiers and the funds they controlled, turned to the Tigers - Malaysia, Indonesia and Singapore.

Malaysia and Indonesia burnt their fingers initially. Jakarta followed the earlier victims and accepted the float in the second week of August. But Kuala Lumpur is still holding on, though for the record, both the Government and the Bank Negara, insist that the Malaysian ringgit is not being defended and is open to the market forces. The Singapore dollar was not as badly mauled as the other regional currencies, losing just over 10 per cent in this period, compared to the 15 to 25 per cent depreciation or devaluation of some other currencies. The Malaysian Prime Minister was the first to respond in public and accuse American financiers of launching the attack with the objective of undermining the strong economic growth recorded by the region.