MANILA, Feb 10: East Asia’s export competitiveness has not eroded even though most regional currencies are rising against the dollar amid Iraq war fears and US fiscal deficit concerns, the Asian Development Bank (ADB) said on Monday.

Except for a short period during the third quarter, most regional currencies appreciated against the greenback in 2002 and have remained buoyant so far in 2003.

The exceptions were the Philippines, where the overshooting of the fiscal deficit target steadily dragged the peso down, and China and Malaysia, whose currencies are pegged to the US dollar.

The Manila-based ADB’s Regional Economic Monitoring Unit (REMU) said the appreciation of the East Asian currencies ranged from three per cent for the Thai baht to about 17 per cent for the Indonesian rupiah.

Despite the appreciation, East Asia maintained its overall export competitiveness, the ADB unit stressed.

This was because the yen and the euro had also climbed against the greenback while East Asia maintained low inflation, REMU said in a quarterly report card on the health of 12 East Asian economies.

Regional currencies, therefore, generally depreciated in nominal effective terms except in Indonesia and, to a lesser extent, in South Korea and Singapore, it said.

Since inflation rates are relatively low in the region, many countries enhanced their export competitiveness last year, according to the ADB report.

East Asia’s main export markets are the United States, Europe and Japan.

So when compared with its other trading partners Europe and Japan, whose currencies appreciated, most of the East Asian currencies effectively depreciated and maintained the region’s export competitiveness, REMU director Pradumna Rana said. Thio Chin Loo, currency strategist with BNP Paribas in Singapore, said based on economic fundamentals alone, East Asian currencies were expected to trade higher against the dollar in the medium term.

The US dollar is more susceptible to financial sector volatility by virtue of them (US) having a large current account deficit, she said.

Even before a possible war in Iraq, the US dollar is more vulnerable than the Asian currencies. So if there is war, it will be even bleaker for the dollar as financing the war will widen the deficit, Thio said.

She added however that the US dollar could face a knee jerk bounce when the war erupts due to the uncertainty of oil prices and other immediate concerns.

But in the medium to long term, market concerns over the US economy would remain intact.—AFP