“Our faith in U.S. Treasuries has not changed,” Yim Jong Yong, South Korea’s vice finance minister, told reporters yesterday in Gwacheon, south of Seoul, after meeting with counterparts from the central bank and financial regulators. The nation will step up monitoring of capital flows and currency movements because of the risk of volatility from the downgrade and Europe’s debt crisis, he said.
“They won’t be happy about it, but Asian central banks will just have to hold on and stick it out,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney. “There is pressure on them to hold on to liquid assets and there is nothing more liquid than the Treasury market. At least Treasuries have been doing well and they aren’t holding on to distressed assets.”