SANTIAGO With the currencies of Malaysia, Indonesia, South Africa, Turkey, Brazil, Colombia, Chile, and Mexico hitting record lows recently, currency traders around the world are asking How much further can emerging market currencies weaken?

Moreover, some emerging market currencies are joining the club of international currencies for the first time. Indeed, some analysts have suggested that the Chinese renminbi may rival the dollar as the leading international currency by the end of the decade.

The American dollar soared, the Japanese yen went into orbit, the euro fell to earth, and the British pound crashed, leaving a giant crater. Emerging market currencies were hammered, as were commodity currencies such as the Canadian, Australian, and New Zealand dollars, and the South African rand.

Exchange of currencies

From past experience with national currencies, Europeans could have expected that any of these shocks would trigger a severe crisis in foreign exchange markets. It is not difficult to imagine what would have happened during the recent financial market crisis if the euro area countries still had all their national currencies immense speculation against some currencies, heavy interventions by central banks, and finally a collapse of the parity system.

depreciation of nonconvertible currencies.

(g) Translation of currencies.

But it signals a shift toward a more market oriented exchange rate. The risk on the minds of investors, managers, and government officials is that currency markets or government managed currencies buffeted by market forces often develop too much momentum and overshoot fundamental values.

Moreover, emerging market countries representation in global governance did not keep pace with the increasingly significant role of their economies and currencies. These countries very success thus became an obstacle to policy coordination.

Also this rise of local currencies.

This was all implicit in the European Union s single market initiative. The eurozone went one step further, aiming through monetary unification to eradicate fully the transaction costs associated with national currencies and exchange rate risk.

But that's just part of the story. You have a similar trend with currencies currencies going through an extreme time of stability.

However, some claims were presented in other currencies, and some others were presented in United States dollars after conversion from other currencies.

The regular resources cash balance at the end of 2004 was 329 million, consisting of 318 million in convertible currencies and 11 million in non convertible currencies.

Chinese officials presumably believe that this situation will change over time. Once banks offer new assets denominated in renminbi, more customers will be drawn into the market, thereby adding liquidity and reducing transaction costs for purchases of renminbi in European currencies.

WASHINGTON, DC Is it appropriate to use trade agreements to discourage countries from using large scale intervention in the foreign exchange market to hold down their currencies value? That is the question of the day in American economic policy circles.

Table 5 Non convertible currencies held at 31 December 2004

And everywhere too, you can see a proliferation of time banks and parallel currencies, people using smart technologies to link up all the resources freed up by the market people, buildings, land and linking them to whomever has got the most compelling needs.

Thus, the past year s currency alignments have, to some extent, simply brought relative domestic price levels and exchange rates into better balance. But by now, emerging market countries exchange rates, and even more so commodity currencies, have probably overshot on the downside.ampnbsp

The amount fluctuates as many frozen accounts are in other currencies.

It is conceivable, therefore, that Europe will have two currencies, the euro and sterling, in the long run. But having three currencies, much less three dozen, is out of the question.amp 160

(iv) Gain loss on exchange arises from transactions conducted in currencies other than euros, for the general and other Headquarters funds and the revaluation of assets and liabilities held in local currencies.

And that's what happens to currencies when you don't stand behind them.

And also starting to play around with the idea of alternative currencies.

But, because they flooded global markets with liquidity, large portfolio flows have moved into emerging market countries, whose currencies often are not as liquid as the dollar. When investment moves back into dollars, the currency fluctuations in these less liquid markets can become excessive.

Conversion would occur outside the market, and thus would not put downward pressure on the dollar. Member countries would receive an asset that was more stable than the dollar, as it was based on a basket of currencies, thereby providing better protection against losses.

Because their currencies are not widely used internationally, many of their bank liabilities are in euros. This renders them dependent on interest rate hikes to attract via the market and on swap lines from the ECB the euro liquidity that their banks desperately need.

However, in areas where the above mentioned expenses are incurred in specific currencies, the maximum amounts of admissible expenses expressed in these currencies shall be those set by the International Civil Service Commission.

Most emerging market borrowers had learned their lesson by the turn of the century, as exchange rate volatility had made the risks of currency mismatch more tangible. When international investors came knocking again in 2003, many emerging markets declined to borrow in dollars or other foreign currencies.

After the collapse of Lehman Brothers in 2008, the rapid expansion of the money supply in the US and the UK triggered a sharp appreciation of the Japanese yen, as well as of some emerging market currencies. In short, QE is what merits concern not its termination.

If today s constellation of exchange rates represents some excessive dollar and yen appreciation, especially against emerging market currencies, when it will unwind? That depends on when you think the financial crisis will abate, and the timing of that is as hard to predict as exchange rates.

These risks explain why the Fed s mere suggestion of a potential move toward reducing its purchases of long term asset (so called quantitative easing) caused emerging market currencies and asset prices to plummet this summer. They also underscore Asian economies need for stronger financial safety nets.

This damages European exports to both the US and Asia. Reduced European dependence on the US export market can hardly protect Europe from the effects of the US economic slowdown if the euro appreciates as much against the key Asian currencies as it has against the dollar.

LONDON The just concluded G 20 meeting in Seoul broke up without agreement on either currencies or trade. China and the United States accused each other of deliberately manipulating their currencies to get a trade advantage.

The sine qua non of manipulation is currency market intervention selling the domestic currency and buying foreign currencies to keep the foreign exchange value lower than it would otherwise be. To be sure, the People's Bank of China (PBOC) did a lot of this over the last ten years.

Ironically, today s pain stems from one of the great successes that emerging economies have achieved the reduction of foreign currency funding in favor of local currency debt. As emerging market central banks leaned against heavy capital inflows in order to mitigate exchange rate appreciation, their currencies became less volatile.

By my calculations, the dollar still needs to go down another 15 if the US trade deficit is to go back towards balance. Ideally, Asian currencies would rise much more than 15 while European currencies would rise less.

The Panel therefore determines the appropriate exchange rate applicable to claims expressed in other currencies.

The equivalent of 1,491,424 ( 1,099,180) is held in currencies classified as non convertible, as follows

Over the long run, globalization and economic convergence will resume, and emerging market and commodity currencies will have to strengthen. At the same time, the prospect of higher US inflation and massively higher US public debt levels must eventually weigh on the dollar, as does the still worrisome US trade deficit.

The higher interest rates rise to stabilize emerging markets currencies, the more severe their crises will be. Ultimately, even if emerging economies manage to diversify their funding away from foreign currencies, they will remain hostages to US monetary policy cycles.

Reintroducing national currencies today would take weeks, at a minimum, whereas Britain in 1931 could take sterling off gold while the markets were closed for the weekend. Back then, countries still had their national currencies they could simply stop supporting them.

It must be emphasized that a system based on competing reserve currencies would not solve the instability and inequities of the current system. In fact, it would add another one the instability of the exchange rates among major reserve currencies.

(v) Gain loss on exchange arises from transactions conducted in currencies other than dollars (i.e. for the dollar based extrabudgetary technical cooperation activities in annex I, dollar statements) and the revaluation of assets and liabilities held in non dollar currencies.

Because other global currencies the dollar, the euro, and increasingly the renminbi would continue to coexist with the SDRs as global reserve assets, another essential element of global macroeconomic cooperation should be defining the particular obligations of countries (or regions) issuing reserve currencies.