At least two Asian central banks were suspected of intervening in their currency markets yesterday, according to traders, as global financial markets went into a tailspin after Britain voted to leave the EU in a historic vote.
Multiple traders said the Bank of Korea was thought to have sold US dollars to curb the won’s fall as the local currency dropped, while the Reserve Bank of India likely sold US dollars through state-owned banks to prevent the rupee from falling further.
An official at the Bank of Korea declined to comment, but South Korean Vice Minister of Finance Choi Sang-mok said the government would make all efforts to minimize the impact from “Brexit.”
“Regarding foreign exchange trade, we will use all usable options to stabilize markets, including launching smoothing operations,” he said.
A senior policymaker aware of the Reserve Bank of India’s plans for Brexit-related market management said that the central bank is “prepared to deal with any volatility.”
The Hong Kong Monetary Authority has asked banks to maintain ample cash conditions with them.
No unscheduled monetary liquidity injection operations have been taken so far, according to an authority spokeswoman.
“Because of this matter, we have made preparation in many aspects. We have reserved sufficient liquidity and we are able to handle in different situations,” Hong Kong Financial Secretary John Tsang (曾俊華) told reporters in the airport yesterday morning before he flew out to Beijing.
The Singapore stock exchange played its part in trying to reduce volatility by raising margins on Nikkei futures traded on its exchange.
The People’s Bank of China injected 170 billion yuan (US$25.9 billion) yesterday, taking the net injection for the week to 340 billion yuan, the biggest in two months.
However, that was seen more about averting a cash squeeze at the end of the half year next week, as has happened previously, rather than responding to the Brexit vote.
The Philippines’ central bank yesterday said it was closely monitoring the foreign exchange market and remains prepared to act to ensure orderly transactions and smooth out volatility.
Separately, a statement from the G7 leading industrial economies was expected yesterday. The question will be whether there is any coordinated intervention to ease monetary policy by global central banks, though room for maneuver is modest.
“The ECB [European Central Bank] has few additional options left, yet it could announce more targeted purchases of peripheral sovereign bonds in the case investors start betting against the euro again,” Pinebridge Investments chief economist Markus Schomer said.
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