Asia central banks try to calm markets with cash, words
Japan, Australia and India flooded money markets with cash on Tuesday and Indonesia cut one interest rate as central banks tried to prevent the upheaval on Wall Street from freezing the global financial system.
The region’s banks dished out nearly $27 billion, following Monday’s $70 billion Federal Reserve injection into the U.S. money market, which seized up after Lehman Brothers (LEH.N: Quote, Profile, Research, Stock Buzz) collapsed to become the latest casualty of the 13-month old credit crisis.
The weekend’s dramatic events that also saw crisis-hit Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) taken over by Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz) and insurer American International Group (AIG.N: Quote, Profile, Research, Stock Buzz) scrambling to raise cash, increased bets on a Fed interest rate cut later on Tuesday.
The Bank of Japan gave the banking system its biggest cash injection in almost six months as the prime minister met top financial policy makers to discuss the fallout of the latest act in the credit turmoil that pushed Lehman into bankruptcy.
The rates at which banks lend to each other jumped in South Korea and the financial hubs of Hong Kong and Singapore, while Asian stock markets, many of them closed for a holiday on Monday, tumbled and currencies whipsawed.
“I expect the BOJ to keep a generous funding stance for a while until market jitters subside,” said Shinsuke Kanabu, joint general manager at money broker Central Tanshi.
Authorities across Asia said they were ready to act and Japan’s central bank backed that up by injecting billions of dollars into the banking system.
“The Bank of Japan will carefully monitor the recent situation surrounding U.S payday loans. financial institutions and its impact,” Governor Masaaki Shirakawa said in a statement.
Filed under: economics by Specialist