Rise of Dollar Forwards Builds Risk for Asian Central Banks
- India, Indonesia used derivatives to defend their currencies
- Trump’s protectionism raises scrutiny of FX interventions
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Central banks across Asia are increasingly using derivatives to protect their currencies against a strong dollar, raising questions over how long they can do so and whether they are just storing up trouble for the future.
The Reserve Bank of India’s net dollar short forward position — the amount of dollars that will be sold at a future date for a pre-set price — hit an all-time high of $68 billion in December. Meanwhile Bank Indonesia’s net short book reached $19.6 billion, its highest since at least 2015, show the latest official data.