Emerging Asia needs dollar hedging reforms to reduce market risks, BIS says


A general view of the skyline from the Makati City Hall in Manila, Philippines, May 11, 2010. To match Special Report CYBER-HEIST/FEDERAL REUTERS/Nicky Loh

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TOKYO, Dec 6 (Reuters) – Asia’s emerging economies should improve oversight of foreign exchange liquidity risks and make currency hedging more flexible as growing dollar investments make the region more vulnerable to currency swings, the Bank for International Settlements said.

Increasing wealth and ageing populations have led to growing holdings of dollar-denominated portfolios of institutional investors and asset managers in Asia’s emerging economies, the BIS said in a quarterly report released Monday.

Vulnerabilities in Asia were seen in March 2020 when the onset of the pandemic led to a surge in dollar hedging demand, creating new stresses for financial markets, the BIS, which holds regular meetings for the world’s central banks, said.

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