Emerging Asia needs dollar hedging reforms to reduce market risks, BIS says

TOKYO : Asia's emerging economies should improve oversight of foreign exchange liquidity risks and make currency hedging more flexible as growing dollar investments make the region more vulnerable to currency swings, the Bank for International Settlements said.

"You have this juxtaposition that demand for hedging is long-term, but the supply of hedging services is short-term," said Hyun Song Shin, economic adviser and head of research at BIS. Trading in derivative contracts referencing the currencies of one of six Asian emerging economies - including South Korea, Malaysia and Thailand - against the U.S. dollar has risen to nearly US$9.4 billion in 2019, more than double 2013 levels, the report said.

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