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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (25676)	3/15/2005 3:56:25 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Asia Can't Keep Funding U.S., Korean Regulator Says (Update1) [This statement comes about a week after they intervened with a $2B purchase of US$ - Mish] March 15 (Bloomberg) -- Yoon Jeung Hyun, South Korea's top banking regulator, said Asian countries can't keep financing U.S. consumption. ``There is widespread recognition that the ongoing trade imbalance between Asia and the U.S. -- that is, Asian savings financing U.S. consumption -- can't be sustained and could potentially pose a systemic risk to the global financial system,'' Yoon, chairman of South Korea's Financial Supervisory Commission, told the Foreign Correspondents' Club in Tokyo. The dollar fell after his remarks. South Korea, which has the world's fourth-biggest foreign exchange reserves, is the fourth-largest foreign holder of U.S. Treasury notes, with $67.7 billion as of Jan. 31, down from $69 billion a month earlier, the Treasury Department said today. The dollar has slipped 2.6 percent against the euro in the past month on concern Asian central banks will slow purchases of U.S. assets. Investors in Japan, China and South Korea -- three of the biggest foreign holders of U.S. debt -- held a total $963.8 billion in Treasury notes at the end of January, down from $974.6 billion at the end of last year. Kwon Jae Jung, a senior adviser to Yoon, said later in a telephone interview in Tokyo that Asian nations won't stop buying U.S. Treasury notes at once and the U.S. trade deficit needs to be addressed step by step. `Potential Problem' ``The U.S. trade imbalance with Asia might be a potential problem in the future and needs to be addressed gradually,'' Kwon said. ``it does not mean that Asian countries such as Korea, China and Japan will stop buying U.S. Treasuries immediately.'' Against the euro, the dollar rose to $1.3324 at 10:40 a.m. in New York, after falling to as much as $1.3412 earlier today, according to electronic foreign-exchange trading system EBS. The dollar traded at 104.37 yen, from 104.85 yesterday, and earlier fell as low as 104.15 yen. South Korea's central bank said on Feb. 18 it plans to boost returns by diversifying its currency reserves. The bank later said it wouldn't sell dollars to achieve its goal. On March 10, Japanese Prime Minister Junichiro Koizumi said on March 10 said his country should consider diversifying its currency holdings, the world's largest. Finance Minister Sadakazu Tanigaki later said Japan won't sell its dollar assets. ``Most Asian countries export goods to the U.S. and make a lot of surplus and then this surplus is used to purchase U.S. Treasuries,'' said Yoon, through an interpreter, in response to a question on whether Asian governments should diversify their currency reserves. ``But if there might be some kind of change in this framework, there might be some turbulence, so I feel we have to study very carefully the benefits that any changes may bring and how it affects our partners in the U.S. and Europe,'' Yoon said. Dollars accounted for 63.8 percent of the world's currency reserves at the end of 2003, down from 66.9 percent two years earlier, according to International Monetary Fund figures released last year. quote.bloomberg.com