Forex pool to help Asia beat downturn

Asian nations will form a $120 billion pool of foreign-exchange reserves that can be used by countries to defend their currencies in an expansion of efforts to battle fallout from the global financial crisis.

Finance ministers from Japan, China, South Korea and 10 Southeast Asian nations agreed to the fund at a summit yesterday in Phuket, Thailand. The amount is 50 percent more than was proposed last May, and a broadening of the current arrangement called the Chiang Mai Initiative that allows only bilateral currency swaps. No date was set for completion of the new pool.

The fund may help ensure central banks have enough to shield their currencies from speculative attacks such as those that depleted the reserves of Indonesia, Thailand and South Korea during a financial crisis a decade ago. Many Asian currencies have tumbled in the past year, threatening regional stability, as the global recession hits their export-dependent economies.