HONG KONG, March 13 (Reuters) - Asian markets looked to policymakers on Friday to help ease a cash shortage as cratering stock markets triggered a rush to dollars, driving many regional currencies lower and threatening a surge in short-term borrowing costs.
Australia’s central bank injected an unusually large amount of cash into the financial system on Friday while South Korea’s central bank said it could inject liquidity if needed and that its board was discussing whether to hold a rare inter-meeting review that could cut interest rates.
In Japan, Yoshiki Takeuchi, the top currency official at the Ministry of Finance, declined to comment on the likelihood of currency intervention, but said the government and the Bank of Japan were ready to work together. The yen’s safe haven status made it one of the few currencies to gain against the dollar, reaching three-year highs earlier this week.
The U.S. Federal Reserve on Thursday surprised markets by injecting $500 billion into the U.S. banking system, and pledging to add a further $1 trillion.
“We should see more action from central banks because what we need here is a short-term liquidity bridge,” said Mohammed Apabhai, head of Asian trading strategy for Citigroup. “The issue is that if we don’t see that, then this situation risks becoming a more systemic problem.”
The unscheduled offer of effectively unlimited dollars came as U.S. stocks plunged nearly 10% in their biggest one-day losses since the 1987 market crash and marked an attempt to avoid the freezing of credit seen during the 2008 global financial crisis.
Some companies have begun hoarding cash and drawing down credit lines as they look to balance the need to pay wages and overheads even as their income is hit by drop in everyday activity.
The Bank of Korea has not delivered an inter-meeting rate cut since October 2008 in the depths of the financial markets.
A 25-basis-point cut would take the base rate to 1.00%, the lowest since the BOK adopted the current policy system in 1999.
In Sydney, the Reserve Bank of Australia (RBA) surprised in its daily money market operation by pumping in A$8.8 billion ($5.52 billion) into the system through repurchase agreements. That was more than twice the amount it had originally intended due to massive bank demand for cash.
The money was loaned for periods ranging from 17 to 95 days, with A$5.6 billion going at the longest date. (Reporting by Wayne Cole in Sydney and Cynthia Kim in Seoul; Writing by Jennifer Hughes; Editing by Sam Holmes)