The ongoing rise of Asian currencies

The governments in these countries are understandably cautious about fully opening up their economies to the vagaries of the global currency market. However, the introduction of NDF e-trading should reassure the authorities that an orderly, transparent and freely traded currency market can facilitate a smooth move into a genuinely globalised market.

The debate about whether the dollar should depreciate further against Asian currencies has, in a way, obscured the more fundamental debate about how this movement should occur. The Chinese route to currency management, taking a glacial approach to allowing currency movement, is likely to be in place for some time.

This is understandable. The complete lack of control over currencies that has seen such significant volatility in the majors over recent weeks worries regimes that are used to being in firm control of their economies. A booming NDF market would show that there can be an orderly transition to sustainable currency trading in the region.

This might go some way to reassuring authorities in the region that a genuinely freely traded currency is not just a gateway to instability and uncertainty. Countries that want to be seen as genuinely developed and have the international clout that their western counterparts enjoy, need to participate on a level playing field.

China in particular has the deep resources to be able to cope with movement in its currency while maintaining a soundly managed domestic economy.

However, we have yet to see how much more activity in NDF trading EBS's online capabilities will lead to. There are a number of obstacles to overcome, and a critical mass of sufficient liquidity for a substantial part of the day will need to be maintained if it is really going to take off. If it does so, it is likely to speed up the evolution to full convertibility, which can only be a good thing for an industry that thrives on new opportunities.