At the same time, central banks must “lean against the wind” and deploy some of their foreign currency reserves as they’ve done so the situation doesn’t get out of hand. “A whole lot of things can happen when the exchange rate moves too fast, too far” including a disanchoring of confidence, he said.
Southeast Asia has done a “decent job” of allowing markets to absorb some shocks from an aggressive US monetary tightening while ensuring that currency weakness doesn’t spiral out of control, according to Singapore’s central bank chief.
“It goes back to striking the right balance between letting the exchange rate depreciate to absorb the shock; not to fight it, not to fight the market movements too much,” Monetary Authority of Singapore Managing Director Ravi Menon said in an interview with Bloomberg Television’s Haslinda Amin.
