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Yahoo! My Yahoo! Mail More Yahoo! Services Account Options New User? Sign Up Sign In Help Yahoo! Search web search Home Singapore Asia Pacific World Business Entertainment Sports Technology Weekend Edition Singapore Asia Pacific World Wall of money leaves Asia swimming against tide AFP - Sunday, October 17 Send IM Story Print Wall of money leaves Asia swimming against tide Slideshow: Full Photo Coverage: Business & Economy BANGKOK (AFP) - – A tidal wave of speculative money is pouring into Asia and driving up regional currencies, stoking political tensions in the run-up to crunch summits as nations raise the barricades to protect exports. While the influx of foreign capital reflects investor confidence in a region that escaped the worst of the world economic crisis, it is making Asian goods more expensive on global markets and fanning fears of asset bubbles. South Korea -- where finance ministers from the Group of 20 nations meet on October 22-23 in preparation for a November summit -- has warned that frictions over the currency upheaval are growing and could lead to trade protectionism. Indeed the political squabbling has already begun: Japan last week took aim at South Korea over its intervention to depress the won against the dollar, saying Seoul's role as summit chair would be "seriously questioned". The United States, facing mid-term elections next month, has ratcheted up the pressure on China to allow the yuan to rise more rapidly, but Beijing insists its currency must not be used as a "scapegoat" for US economic woes. "The scene is now set for plenty of friction and potential volatility ahead of the November G20 meeting in Seoul," said Credit Agricole analyst Mitul Kotecha. The dollar has slumped on expectations that the US central bank will print more money to inject cash into its banking system and stimulate growth, diluting the value of the currency. With Beijing keeping a tight grip on the yuan, many other Asian economies are suffering as their currencies soar against the dollar. Despite Europe's debt woes, the euro has also surged. Japan has reduced its official interest rate to almost zero and last month intervened in the foreign exchange market for the first time in six years to sell the yen after it hit a 15-year high against the dollar. But the moves failed to halt the Japanese currency's ascent. Thailand has also moved to stem capital inflows after a 10-percent jump in the value of the baht over the past year, slapping a tax on foreigners investing in bonds, on the heels of a similar move by Brazil. Such actions are fomenting fears of a "currency war" heading into the G20 meetings and summits of East Asian and Asia-Pacific leaders in the coming weeks as governments jostle for trade advantage. "The fallout from a cheap dollar and the artificially weak yuan is being felt across the emerging world," said Jane Foley, a senior forex strategist at Rabobank International in London. The Washington-based Institute of International Finance estimates that net private capital flows to emerging economies will hit 825 billion dollars this year, up from 581 billion in 2009. Of that, almost 343 billion dollars is predicted to flood into emerging Asia, up from 337 billion last year and roughly 122 billion in 2008. "It may go against the concept of free trade but it is easy to understand why some governments including Brazil, Thailand and South Korea have resorted to intervention in an attempt to offset some of these inflows," Foley said. This wall of money is causing a headache for Asian central bankers who would like to raise interest rates to control inflation but fear that doing so will only attract more investors seeking higher returns. Concerned about rising consumer prices, Singapore on Thursday tightened monetary policy to cool inflation, pushing the local dollar up to a record high against the greenback. Reluctant to impose draconian measures that could spook markets, Asian policymakers appear to have limited tools at their disposal to curb the money inflows. In Thailand, where the introduction of capital controls in 2006 sparked a plunge in the stock market, Prime Minister Abhisit Vejjajiva has said that aggressive currency intervention would be costly and probably ineffective. Experts at the International Monetary Fund have said capital controls are "a legitimate part of the toolkit", but are also working on a multilateral initiative in the hope of averting any currency war. Despite the IMF's initiative, authorities seem poised to take further steps to help exporters. "We expect more intervention and forex reserves accumulation in emerging Asia as well as further regulatory controls to curb capital inflow," analysts at the Capital Economics consultancy firm wrote in a note to clients. "However, the regional approach will most probably remain a measured and sensible response pitched at moderating the inflow and curbing appreciation rather than being aimed at shutting capital out and pushing currencies weaker." 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