S-E Asia's dwindling reserves exacerbate risk of currency war

Kuala Lumpur

SOUTH-EAST Asia's dwindling foreign-exchange holdings are exacerbating the risk of a currency war as policymakers have little choice but to allow weaker exchange rates.

Malaysian reserves have fallen 19 per cent this year to US$94.5 billion, reducing the central bank's ability to stem an 18 per cent drop in the ringgit. Indonesia's stockpile, which shrunk 6.9 per cent in the five months through July, may come under greater pressure after Bank Indonesia said on Friday that it would seek to prevent the rupiah, which is down 12 per cent in 2015, from "overshooting".