Source: Wall Street Journal               Date: August 17, 2011

World stock traders are turning to emerging Asian currencies amidst the decline of western currences, reported the Wall Street Journal. Asian currencies have reacted minimally since the US credit rating was down-graded from “AAA” to “AA+,” propagating the idea they may be a “safe haven.”

At a time when most expected Asian currencies to strengthen against the US dollar, the Thai Baht, Mayalaysain reinggit, and Indonesian ruiah all remained largely unchanged. Safe balance sheets and continued growth inspire greater confidence, reported the Wall Street Journal. China allowed the yuan to increase just 0.8 percent against the US dollar, but this is quite a drastic appreciation for China.

Meanwhile, governments in the west have raised interest rates and made lending more difficult. China's strict control over the stock market and limits to foreign investors gives them less hope; thus investors are turning to countries with close ties to china. Due to its “free-floating currency” and short-term investments, Australia is a winner.

The strategy bottleneck's at the limit of assets available for investment, reported the Wall Street Journal. The Asian Development bank estimates the local currencies at USD 5 trillion compared to the USD 31 trillion worth of US bonds. Worse still, at least half of that figure belongs to the well guarded Chinese market.