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Last Updated: Monday, 22 January 2007, 07:24 GMT
Asian heads stress currency risk
Japanese shoppers
Globalisation has led to capital inflows into Asia
Asian central bankers have warned against the destabilising impact of capital inflows and unstable currencies in the region.

Bank of Japan governor Toshihiko Fukui said keeping foreign exchange rates stable would be one of the hardest tasks for monetary authorities.

Others warned that volatile exchange rates could harm imports and exports.

But leaders - at a symposium to mark 10 years since the Asian financial crisis - said market conditions had improved.

Monetary policy

"The foreign exchange and financial markets are much more stable and the currencies sometimes face upward rather than downward pressure," said Mr Fukui, at the event which was hosted by the Bank of Japan.

But he added that as a result of the globalisation of the world's financial markets, large capital flows would keep influencing open economies.

"It is, and will surely be, the most difficult task for any monetary authorities to maintain the stability of foreign exchange rates, the free flow of capital, and the independence of monetary policy simultaneously," Mr Fukui said.

Thailand's central bank governor, Tarisa Watanagase, said the key for its economy to grow would be by preventing the Thai baht from becoming too strong against other currencies.

A recent influx of capital to Thailand prompted a rise in the baht that was "detrimental to competition", said the bank's governor.

Meanwhile, a decision by Thailand's newly installed interim government to restrict ownership by foreigners of Thai companies has raised worries and destabilised the baht.

To prevent capital inflows from destabilising the region, International Monetary Fund chief Rodrigo Rato suggested that more could be done by making Asia's financial systems stronger and integrating the region's financial systems better.

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