ASEAN+3 finance ministers’ decision to launch an official study of the idea of an Asian Currency Unit (ACU) met with a wave of market scepticism yesterday, although some bankers said the idea could be useful on a long-term basis. Asia needs to move further forward on economic and political integration before experimenting with moves towards a common currency was the general view. “Asia is not an optimum currency area” at present, commented Mark Siegel chief executive officer at Babson Capital Japan, a subsidiary of the Massachusetts-based Babson fund management group to Emerging Markets. “I am not convinced of the utility of creating an Asian Currency Unit,” at this point in time, he said.
Michael Weber, head of financial institutions for Asia Pacific at HSH Nordbank in Kiel, Germany, was more positive. A currency index such as the envisaged ACU “could be useful” for the market, he told Emerging Markets but Asia should not try to run before it can walk and should remember that Europe needed 30 years to achieve monetary union.
The ministers decided on Thursday to take charge of the project launched last year by the ADB to formulate an index of Asian currencies for the benefit of the market and policy-makers. They will ask a leading Japanese research institute, yet to be selected, to study the market and economic utility of the idea and to report back to them.
The head of the ADB’s office for regional economic cooperation Masahiro Kawai, who has been the main driving force behind the idea, indicated that the ADB does not feel in any way snubbed by the ASEAN+3 ministers’ decision to take over the initiative. The ADB has gone about as far as it can with the scheme, he has suggested.
But people like Babson’s Siegel are not convinced. “The marketplace is already capable of looking at currencies on a basket basis,” he said, effectively rejecting Kawai’s argument that an ACU is essential before multi-currency Asian bonds can be launched. If policy-makers need to know how Asian currencies are moving relative to one another, “all they need is a spreadsheet and not an [official] index,” he said.