Asian nations have agreed to broaden the common reserves they can draw on to protect regional currencies to $120 billion. Finance ministers from China, Japan, South Korea and the 10 members of Association of Southeast Asian nations agreed to boost the fund from its former ceiling of $80 billion. The agreement was reached during a gathering Sunday of financial leaders in Phuket, Thailand, The fund aims to ensure countries have reserves on hand to defend their currencies against the prospect of speculative attack. The region has painful memories of the hardship suffered during the Asia financial crises more that a decade ago, when currencies like Thailand's baht came under attack, eventually forcing the central bank to abandon its defense of the currency. Analysts said the agreement was a significant deepening of the previous Chiang Mai plan. "The initiative speaks to ongoing and improving cooperation and policy maturity here in Asia," wrote SocGen Foreign Exchange Strategist Patrick Bennett in a research note Monday He added that the initiative would help buttress regional currencies against speculative attack and ease the impact of sudden capital flight, which could destabilize markets. "It will not in and of itself prevent further modest currency weakness, as remains appropriate in the weeks and months ahead as economies face further curtailment of external demand," Bennett said. China, Japan and South Korea will provide 80% of the $40 billion in additional funding. In the past year Thailand's baht is down about 11.8% against the dollar, Indonesia's rupiah is down 23% and South Korea's won has fallen 37%.

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