Asian Nations Gain Indirectly From Dollar's Declining Value
By KEITH BRADSHER
HONG KONG, May 20 — The most unlikely winners from the dollar's slide in value are some of the countries compiling the biggest trade surpluses with the United States, especially China.
China and most Southeast Asian nations have linked their currencies to the dollar in one way or another, so its slide has pulled down the value of their currencies as well. This has made their exports more competitive in Europe, where the dollar has fallen more than 20 percent against the euro over the last year, and even in Japan, where the dollar has dropped 10 percent against the yen in the same period despite the Japanese government's repeated interventions in currency markets.
At the same time, companies in China and Southeast Asia have lost none of their competitiveness in their main export market, the United States.
"Everything we buy or sell, materials and finished products, is all denominated in dollars," said Bruce Grill, a middleman here who helps American stores buy shoes from Chinese factories. When it comes to the dollar's decline, he said, "We're not affected by it."
The biggest beneficiaries are Asian exporters to Europe like Trimex Holdings, a Hong Kong company that buys power tools from factories in China and exports them to hardware stores in the European Union. Trimex has continued to charge the same prices in euros to many of its European customers and has converted the proceeds into more and more dollars as the dollar declined. But the cost of buying the tools from China, transacted in dollars, has barely increased. "It is a very good thing for our gross profit margins," said Thomas van Duinen, Trimex's general manager of Asian operations.
European retailers are also profiting. El Corte Inglés, a chain of high-quality Spanish department stores, buys electronics, garments, food and beverages from China and has been able to persuade many of its suppliers over the last year to accept payment in euros, said Alejo Rodríguez, the general manager of its Hong Kong purchasing office.
The switch to negotiating contracts in euros should provide some protection for El Corte Inglés if the dollar rebounds. At the same time, the chain has been negotiating new contracts at lower and lower prices in euros because Chinese factories are still incurring costs either in dollars, for oil and oil-based materials like plastic, or in Chinese yuan, for labor and many other costs.
"That the euro is stronger makes life easier for us," although it hurts exporters back in Spain, Mr. Rodríguez said. "It's easier to negotiate; it's easier to get better prices."
Some currencies in Southeast Asia, like the Hong Kong dollar and the Malaysian ringgit, are officially pegged to the dollar, rising and falling in lock step with it. China's central bank informally but effectively ties the yuan's value to the dollar.
Other currencies in the region — like the Singapore dollar, the Thai baht, the Indonesian rupiah and the Taiwan dollar — are loosely pegged to the dollar and have crept up slightly against it in recent months, but have fallen against other currencies because of the dollar's decline.
The dollar slipped some more today after dropping notably on Monday in response to weekend remarks by Treasury Secretary John W. Snow that suggested weakening support from the Bush administration for a strong-dollar policy. Late this afternoon in New York, the euro settled at $1.1738, up from $1.1643 late Monday. The dollar dropped to 116.71 yen from 117.40 yen on Monday despite remarks from Finance Minister Masajuro Shiokawa that Japan might again intervene in the markets and sell more yen.
To limit or prevent their currencies' rise against the dollar despite substantial trade surpluses, Asian governments have been buying dollars from exporters, paying with more of their domestic currency. They have accumulated hoards of foreign exchange reserves as a result, with the world's top five holders of such reserves all in Asia.
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