Lending toughter; more Asian currencies used to settle trade

Written by changthai11 on Saturday, October 4th, 2008

Lending toughter; more Asian currencies used to settle trade

BANGKOK, Oct 4 (TNA) — Thai financial institutions are expected to become more cautious lenders, and Asian countries are likely to make greater use of regional currencies rather than the US dollar in making payments following the US financial crisis, according to Narongchai Akrasanee, executive chairman of the Export-Import Bank of Thailand.

Mr. Narongchai, a former commerce minister, said that the demand for Thailand’s baht currency is rising as banks have become reluctant to extend dollar loans to finance investment projects in Thailand, causing a decline in the normally plentiful liquidity of the baht in the system.

The higher demand for the Thai baht will force local financial institutions to become more wary in granting loans and will eventually tighten liquidity, he said.

As it is still unclear how the US$700 billion rescue package could help the US financial institutions to weather the crisis and to what extent, Mr. Narongchai said businesses in Asia would likely turn to major regional currencies like the Japanese yen, the Chinese yuan and the South Korean won for trade and investment transactions among them.

In future, the Asian bond could become a reality, he said.

The Asian bond is aimed at creating a source of funds for long-term investment in Asia by promoting development of the regional bond market. (TNA)