Currency dilemma

Lex - Managing Asian currencies on the dilemma that is facing many of the Asian exporting countries and their commodity cousins. With free capital flow, it is hard to manage exchange rates and domestic liquidity.

"More likely, countries such as Thailand and South Korea are more worried about excessive domestic liquidity, leading to credit growth, inflation and rising asset prices. Economists judge that it is impossible to manage both domestic liquidity and exchange rates, while having an open capital account – one of the three has to give. Thailand’s capital controls, therefore, might offer a workable solution to managing the currency. This makes Tuesday’s rate cut surprising, as it will certainly spur domestic demand"