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The Currency Composition of Asia’s International Investments

Author

Listed:
  • Paulo Rodelio Halili

    (Asian Development Bank)

  • Rogelio V. Mercado, Jr.

    (South East Asian Central Banks (SEACEN) Research and Training Centre)

Abstract

This paper examines the importance of trade ties, macro-financial volatilities, and US dollar trade invoicing in explaining Asia’s international investment assets and liabilities denominated in world currencies, including the US dollar (USD), euro (EUR), pound sterling (GBP), Japanese yen (JPY) and Chinese yuan (CNY). The results show heterogeneous patterns of relevant covariates across different currencies. More importantly, the estimates offer evidence that the region hedges its currency risk by investing in US dollar denominated assets as greater US dollar trade invoicing significantly covaries with greater debt asset holdings denominated in US dollar.

Suggested Citation

  • Paulo Rodelio Halili & Rogelio V. Mercado, Jr., 2022. "The Currency Composition of Asia’s International Investments," Working Papers wp49, South East Asian Central Banks (SEACEN) Research and Training Centre.
    • Handle: RePEc:sea:wpaper:wp49
    as

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    File URL: https://www.seacen.org/publications/RePEc/702001-100483-PDF.pdf
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    References listed on IDEAS

    as
    1. Bénétrix, Agustin S. & Lane, Philip R. & Shambaugh, Jay C., 2015. "International currency exposures, valuation effects and the global financial crisis," Journal of International Economics, Elsevier, vol. 96(S1), pages 98-109.
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    5. Galstyan, Vahagn & Mehigan, Caroline & Mercado, Rogelio, 2020. "The currency composition of international portfolio assets," Journal of International Money and Finance, Elsevier, vol. 103(C).
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    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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