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The battle to defend Asian currencies is actually a series of measures taken by various countries to maintain their own economic stability.
In the context of globalization, the economies of various countries are deeply integrated, and the monetary policy of the United States has a direct and far-reaching impact on the global economy.
In particular, the Fed's interest rate hikes or cuts will affect the economies of Asian countries through capital flows.
The Asian currency defense war is in full swing, with countries joining forces to fight back against the Federal Reserve's monetary policy.
On the evening of May 15, Fed Chairman Jerome Powell revealed that the Fed may not raise interest rates next;
The news immediately sent shockwaves through global financial markets.
How Asian countries respond to this change has become the focus of attention.
China: Multiple measures to stabilize the renminbi
As the leader of the Asian economy, China's monetary policy has attracted much attention.
In recent years, the People's Bank of China (PBOC) has stabilized the RMB exchange rate by cutting the reserve requirement ratio (RRR) and interest rates, while strengthening the management of foreign exchange reserves to avoid the impact of external shocks on the domestic economy.
According to statistics, as of April 2024, China's foreign exchange reserves reached US$3.2 trillion, which is enough to deal with potential international financial risks.
Japan: Resolute action to defend the yen
Japan has also spared no effort in defending the yen.
In recent years, the Bank of Japan has implemented a large-scale quantitative easing policy in an attempt to stimulate economic growth by increasing the money supply.
However, the Fed's interest rate hike policy has led to capital outflows, putting the yen under depreciation pressure.
To this end, the Bank of Japan has recently intervened several times in an attempt to stabilize the exchange rate by buying the yen outright.
South Korea: A staunch line of defense for the won
The situation in South Korea is similar to that in Japan, and the Fed's interest rate hike policy has also put some pressure on the won.
In response to this challenge, the Bank of Korea has intervened in the foreign exchange market several times in recent months to prevent excessive depreciation of the won by selling dollars and buying won.
In addition, the South Korean government has also strengthened market confidence by strengthening financial regulation and improving the transparency of financial markets.
South Korea is also focusing on improving its export competitiveness and responding to changes in the external market by optimizing its export structure and increasing the added value of its products.
In recent years, South Korea's exports in high-tech fields such as semiconductors and automobiles have performed well, providing solid support for the stability of the won.
The Fed's "scramble"
In the face of a series of counterattacks from Asian countries, the Fed has also become extremely difficult.
In his speech on 15 May, Powell hinted that the Fed may not raise interest rates next, a statement that was interpreted by the market as a compromise on global economic conditions.
The Federal Reserve's interest rate hike policy in recent years is mainly in response to inflationary pressures in the United States.
However, the side effects of this policy are being felt globally, especially in emerging market countries.
Capital outflows from emerging markets have led to currency depreciation, slower economic growth, and even the risk of a financial crisis.
Against this backdrop, the Fed has had to re-examine the impact of its monetary policy, taking into account the stability of the global economy.
Powell's statement shows that the Fed is becoming more and more difficult to balance between the global economy and the domestic economy.
Countries have joined forces to overcome the difficulties
Asian countries have shown unprecedented solidarity and cooperation in the face of the Fed's monetary policy challenges.
Countries have not only stabilized their economies through domestic policies, but have also strengthened intra-regional cooperation to jointly respond to external shocks.
A new level of regional cooperation
Monetary cooperation among Asian countries has become an important means of coping with the impact of the Fed's policy.
For example, the central banks of China, Japan and South Korea recently held a series of meetings to discuss how to stabilize regional economies through coordinated policy.
The three countries have also signed a number of currency swap agreements to ensure that liquidity support can be provided to each other in the event of an emergency.
In addition, Asian countries have strengthened cooperation among international financial institutions to promote the reform of the global financial system.
For example, on platforms such as the International Monetary Fund (IMF) and the World Bank, Asian countries have actively spoken out;
Strive for more institutional safeguards to prevent unilateralist policies from impacting the global economy.
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