As the globe is on the brink of a currency war, Bank of Thailand Governor Prasarn Trairatvorakul sees the need for regional cooperation in combating the massive capital inflows into Asia, which have sharply driven Asian currencies up against the US dollar and affected the economies’ competitiveness.

Prasarn sees the scope for such cooperation, paved by existing frameworks like the Chiang Mai Initiative, and this could lead Asia into a new landscape in the next 10-20 years. The picture includes a new trade currency and a currency to store the value of assets, aside from the greenback.

“This requires the power and cooperation from a large sized economy that must act as the leader and show its prowess,” the governor said at a press conference yesterday.

Currency woes are part of the agenda to be discussed by Asean leaders in Hanoi this weekend. Volatility tends to rise in line with monetary easing in major economies like the US and Japan, which are witnessing fragile recoveries. Several Asian countries, including South Korea, also urged nations to act unilaterally to control capital flows, despite the Group of 20’s broad rules on averting currency and trade rows.

The International Monetary Fund also considers the greenback “overvalued”, which indicates further weakening. In a note to finance officials, it also said decisions by China and some other Asian emerging economies to limit currency appreciation is contributing to “significant exchangerate misalignments” and to tensions across the G20.

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Camilla Davidsson is a photographer based in Bangkok

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