Obviously, the main currencies used in ASEAN are US dollar, Euro, UK pound, and the Japanese yen. This section shows the comparison of those currencies to RMB in recent years. As mentioned earlier, the most important currency for ASEAN is US dollar. There are several reasons behind this. First, ASEAN’s currencies were originally fixed to US dollar since the countries would like to import macroeconomic stability from US dollar. With the mismanaged U.S. monetary policy, ASEAN countries would like to delink this linkage.
Second, exchange rate stability is important for intra-regional trading. Since most countries have stabilized their currency to US dollar, US dollar then automatically provide a high degree of exchange rate stability. According to Rövekamp, Frank, Hilpert, Hanns Günther (Eds.) (2014), the share of currencies invoiced in exports of Asian and Pacific countries (not include …show more content…
From 1991, the use of Euro started to rise, though in a very small percentage. Recently, the use of Euro is increasing, but still cannot match with the US dollar. Furthermore, based on an ASEAN research , for Indonesia in 2010, about 90% of total exports are in the US dollar. By destination, almost a full 100% of exports to the US were conducted in the US dollar. The data also stated that only 9% of exports to Europe were conducted in Euro and approximately 10% of exports to Asia were in Asian currencies. The use of local currency as an invoicing currency was very limited. In fact, it never reached 2.5% in the last ten years. Indonesian firms generally prefer US dollar due to these three main reasons: history, hedging motives, and market rules. From Indonesian’s view, the Japanese yen and RMB meet the requirement for being a vehicle currency only for international trade within the region. From the same research, it suggests that even though US dollar was a key invoicing currency in
Second, exchange rate stability is important for intra-regional trading. Since most countries have stabilized their currency to US dollar, US dollar then automatically provide a high degree of exchange rate stability. According to Rövekamp, Frank, Hilpert, Hanns Günther (Eds.) (2014), the share of currencies invoiced in exports of Asian and Pacific countries (not include …show more content…
From 1991, the use of Euro started to rise, though in a very small percentage. Recently, the use of Euro is increasing, but still cannot match with the US dollar. Furthermore, based on an ASEAN research , for Indonesia in 2010, about 90% of total exports are in the US dollar. By destination, almost a full 100% of exports to the US were conducted in the US dollar. The data also stated that only 9% of exports to Europe were conducted in Euro and approximately 10% of exports to Asia were in Asian currencies. The use of local currency as an invoicing currency was very limited. In fact, it never reached 2.5% in the last ten years. Indonesian firms generally prefer US dollar due to these three main reasons: history, hedging motives, and market rules. From Indonesian’s view, the Japanese yen and RMB meet the requirement for being a vehicle currency only for international trade within the region. From the same research, it suggests that even though US dollar was a key invoicing currency in