Dollar depreciates relative to Asian currencies, potentially causing problems for South Korea.
Rewritten Article:
Flash the screens of currency exchange booths in Seoul, as the world watches the Asian currency rally provide a unique lift to the won, the region's underdog. The scene begs the question: what's driving this change?
Let's delve into the intricacies of the ASEAN+3 currency swap program, a significant player in the region's financial landscape. In May 2025, this program, often known as the Chiang Mai Initiative Multilateralization (CMIM), underwent significant advancements.
The CMIM, initially launched in 2010, was a response to the 1997 Asian financial crisis. Today, it's being transformed to resemble the International Monetary Fund (IMF), enhancing its practical response capabilities during a crisis. The structural change ensures that paid-in capital is now considered foreign exchange reserves, making resources instantly accessible during times of turmoil [2][1].
The program's scope is no longer limited to traditional foreign exchange crises. It now addresses emerging challenges, such as infectious disease outbreaks and natural disasters, reflecting a more adaptable approach to regional financial safety nets [3][4].
Perhaps the most notable change is the introduction of a new rapid financing mechanism, which, for the first time, will utilize regional currencies, such as the Chinese yuan, instead of solely relying on the US dollar. This shift marks a broader regional strategy to decrease reliance on the US dollar and foster stronger financial cooperation among Asian countries [5].
These developments were finalized during the 28th ASEAN+3 Finance Ministers' and Central Bank Governors' Meeting held in Milan, Italy, on May 4, 2025 [1][2]. The move to incorporate regional currencies and structure the CMIM fund similar to the IMF is expected to significantly strengthen the region's ability to respond to financial crises and emergencies independently of global financial institutions and the US dollar [2][5].
In comparison, the CMIM's evolution:
| Feature | Previous CMIM Structure | Current CMIM (2025) ||-------------------------------|------------------------------|------------------------------------|| Total Size | $240 billion | $240 billion (with improvements) || Currency Used | Primarily US dollar | Regional currencies (e.g., yuan) || Recognition as Reserves | Limited | Yes (paid-in capital as reserves) || Scope of Use | Foreign exchange crises | FX crises, pandemics, disasters || Model | Regional swap arrangement | IMF-like rapid financing fund |
In a nutshell, the ASEAN+3 currency swap program is now more robust, versatile, and reflective of the region's push for greater financial independence and resilience, particularly through the inclusion of regional currencies and an expanded crisis response framework [2][5][4].
- The government and central bank governors recognized the importance of financial independence during the 28th ASEAN+3 Finance Ministers' and Central Bank Governors' Meeting in Milan, Italy, and decided to strengthen the ASEAN+3 currency swap program.
- In an effort to decrease reliance on the US dollar, the program's new rapid financing mechanism will utilize regional currencies such as the Chinese yuan instead of solely relying on the US dollar.
- Businesses within the finance industry are closely monitoring the news1 about the transformation of the ASEAN+3 currency swap program, which now resembles the International Monetary Fund (IMF), strengthening the region's ability to respond to financial crises and emergencies.
- The economy of the region may benefit greatly from the evolution of the ASEAN+3 currency swap program, as it now addresses emerging challenges such as infectious disease outbreaks and natural disasters with a more adaptable approach to regional financial safety nets.
- The changes to the ASEAN+3 currency swap program are significant for Jung, a small business owner who operates a currency exchange booth in Seoul, as the increased financial independence of the region is likely to have a positive impact on the won, the region's underdog currency.
