‘Impossible Trinity’ Conundrum Has Caused a Cash Crunch in Asia
- FX interventions have squeezed liquidity, pushing up rates
- RBI injects cash via bond purchases, swaps to soften the blow
Rising interbank rates are a sign of a cash shortage that could hit the wider economy.
Photographer: Qilai Shen/BloombergThis article is for subscribers only.
Some of Asia’s biggest central banks are getting a painful refresher in economic theory.
Monetary authorities in China, India and elsewhere have waged a prolonged campaign against the strong dollar, using a mix of official reserves and opaque derivatives trades to defend their currencies. But their moves have pushed up borrowing costs for local banks just when slowing economies need more liquidity.