THE Hong Kong Monetary Authority (HKMA) yesterday issued its strongest commitment to protection of the currency against speculators as it signed agreements with four of the region's central banks.
The move puts in place another line of defence for four regional currencies against the sort of attack which drove them down last January after the Mexican peso crisis.
The agreements follow informal meetings in Hong Kong involving central bankers and monetary authorities from Australia, China, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines and Thailand.
HKMA chief executive Joseph Yam said: 'We had a very good discussion on quite a lot of things, basically centring around co-operation in the region - whether there should be greater co-operation and how to achieve greater co-operation.' The authority signed repurchase agreements with the central banks of Malaysia, Thailand, Indonesia and Australia, allowing the banks to provide liquidity on a two-way basis, and predicted that other agreements would be signed between central banks.
The repurchase agreements allow borrowers to raise money by selling an asset - in this case, US dollar-denominated debt securities - to raise US dollars on condition that they will buy back the asset at an agreed price and date.
Mr Yam said the arrangements increased individual central banks' liquidity by giving them access to cash, while offering the lenders security because there would be no settlement risk.
He said the Monetary Authority of Singapore (MAS) had been invited to participate but the notice given of the meeting had been too short.
