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Trading with local currencies instead, now it’s TH, MY and ID.

Posted in ASIA / ASEAN, and Bank Negara Malaysia (BNM)

I always see ASEAN as an awesome place. Nearly 30 percent of Malaysia’s trade is with ASEAN. (Source: Matrade.gov.my) Reason is simple. Better be integrated, else we will allow the other world of economic groups take charge while we continue to lose out individually. Some time back, the central banks of Malaysia and Thailand agreed on a framework of cooperation to promote local currencies. In brief, when business trade between both countries, they will use local currencies instead of US$ like what is always happening today. Now, Indonesia has joined too. In other words, trades between Thailand, Malaysia and Indonesia would be conducted in our local currencies instead. It reduces volatility because there is no longer a third currency which actually plays no part at all beyond just facilitating it. Our Bank Negara governor Datuk Muhammad Ibrahim said, “We can expect continued episodes of volatility to occur in the periods ahead, driven by a combination of policy uncertainties, negative sentiment and speculative activity.” Full article in NST here. 

In brief, I think he meant this is for real business trades. This is NOT for currency speculation activities. I personally think most economists would agree that countries with huge trade surplussed should have a stronger currency versus another country with huge trade deficits. Else, the world goes haywire. (Like today…..) The three forward-looking central bank governors who signed the bilateral MoUs are Bank Indonesia governor Agus D.W. Martowardojo, Bank Negara Malaysia governor Datuk Muhammad Ibrahim and Bank of Thailand governor Veerathai Santiprabhob. I am wondering when would Ravi Menon and Amando Tetangco be following as well. Go and google for who are these two people yeah. 🙂  Oh by the way, “the arrangement has been expanded to include clearly defined protocols and operational frameworks in a broad range of areas, including financial market development, supervision, surveillance, payment arrangements and crisis management.”

 

written on 25 Dec 2016

Next suggested article:   IMF to Malaysia:Growing yes but WATCH OUT

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