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It's called ``The Asian Bellagio Group,'' a name that is borrowed from the European Bellagio Group, a gathering of academics started in the 1960s. Asia's group includes officials from Japan, China, South Korea and Southeast Asian nations who met in Bangkok last week to discuss the dollar's slide.
The group is a formidable crowd, considering it holds well over $1.1 trillion of U.S. Treasuries. In fact, if Federal Reserve Chairman Greenspan is wondering why his recent rate increases aren't working out as planned, he need only look to the East.
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Yet when Korea, the world's fourth-biggest holder of reserves, last week suggested it might diversify into other currencies, markets plunged. When the Bank of Korea said it would hold onto its dollars, markets returned to normal, satisfied that the mighty U.S. had again prevailed over compliant Asian economies.
Nothing could be further from the truth. Korea's about-face merely shows the bind Asian officials are in. They risk a big hit to public finances by publicly selling a currency that has lost 34 percent versus the euro in the three years through 2004. Their economies also become less competitive as currencies rise against the dollar and the Chinese yuan, which is pegged to the dollar.
Bloomberg