Indonesia LCSs cut demand for US dollar

G20 host Indonesia promotes FX diversification as part of stimulus exit
https://www.reuters.com/world/asia-pacific/indonesia-cbank-t…

Indonesia, which holds the presidency of the Group of 20 major economies this year, and a number of Asian countries have bilateral deals to settle transactions in domestic currencies, known as local currency settlement (LCS) arrangements, which cut demand for the dollar.

Bilateral currency swaps among members of the Association of Southeast Asian Nations (ASEAN), China, Japan and South Korea have reached $380 billion, according to the People’s Bank of China.

Snip…

Previous periods of global monetary tightening have triggered capital outflows from emerging countries as investors flock to put their money in safe-haven assets. Indonesia saw the rupiah currency plummet by more than 20% in 2013 during the so-called “taper tantrum”.

Snip…

LCS arrangements had cut Indonesia’s U.S. dollar exposure by $2.53 billion in 2021 and a further 10% increase in such settlements is expected this year…

Snip…

China* will work with Asian countries to beef up the use of local currencies in trade and investment,

Let’s see. Countries with bilateral agreements for LCSs:

  • Russia and China
  • ASEAN countries
  • are there LCSs amongst the South American countries? MERCOSUR is a major South American trade bloc.
  • African countries? African Continental Free Trade Area is the major African trade bloc.

Cryptocurrencies reportedly are not dollar dependent?
Do the “digital” currencies used by some Caribbean countries count?

*China promotes bilateral currency swaps that exclude US Dollar.
https://www.thehindubusinessline.com/opinion/bilateral-swaps…

At the bottom of this page, is a swaps tracker that shows the emergency of currency swaps from 2007 to 2020.
https://www.cfr.org/article/central-bank-currency-swaps-trac…

:alien:
ralph

3 Likes