East Asia's Foreign Exchange Rate Policies
Abstract
Financial authorities in East Asia have adopted a variety of foreign exchange rate policies, ranging from Hong Kong's currency board system which links the Hong Kong dollar to the U.S. dollar, to the "independently floating" exchange rates of Japan, the Philippines, and South Korea. Most Asian monetary authorities have adopted "managed floats" that allow their local currency to fluctuate within a limited range over time as part of a larger economic policy. Over the last few years, the value of the U.S. dollar has generally declined against most major currencies, although the U.S. dollar has rebounded against some currencies in recent months. The various economies of East Asia have responded differently to the fluctuation in the value of the U.S. dollar. Some have allowed their local currency to appreciate against the U.S. dollar; others have held the value of their currency against the U.S. dollar relatively unchanged. A few have seen their currencies depreciate in value relative to the U.S. dollar. While there is some evidence of competitive adjustments among some of the exchange rates, it is unclear if these adjustments have had much impact on exports to the United States. While U.S. policy has generally supported the adoption of "free float" exchange rate policies, most of East Asia considers a "managed float" exchange rate policy more conducive to their economic goals and objectives. In addition, it is uncertain if the adoption of "free float" exchange rate policies across East Asia would necessarily lead to a major decline in the U.S. trade deficit with East Asia. It is possible that U.S. complaints of "currency manipulation" and pressure on one East Asian government to alter its exchange rate policy may foster resistance from other East Asia governments that have adopted similar exchange rate policies. This report will be updated as events warrant.
Document Details
- Document Type
- Technical Report
- Publication Date
- Jul 16, 2009
- Accession Number
- ADA503834
Entities
People
- Michael F. Martin
Organizations
- Library of Congress