25 May 2024
Strong dollar haunts Asia 3

Strong dollar haunts Asia 3

A strong US dollar was a factor in triggering the Asian financial crisis in 1997 as well as the dire situation in Latin America a decade ago.

When the USD falls, liquidity floods into emerging markets, boosting growth and asset prices.

Analyst William Pesek said that the USD is in the third `super bullish` cycle in 30 years.

In emerging economies with highly volatile local currencies such as India or Malaysia, issuing debt listed in USD may still be a wise strategy.

The USD is at a 12-year peak compared to a basket of major world currencies.

However, the fortunate thing is that Asia seems to be well prepared to withstand currency fluctuations compared to 1997. `Everyone is anxiously watching the rise of the US dollar. But this time is completely different than before.

Maguire has many reasons to be optimistic.

However, if emerging economies are caught up in the current chaos, Asia will no longer be immune to crisis.

Asia may regret the high level of USD-denominated debt in the non-financial sector.

In recent weeks, the Central Banks of India, Thailand, and South Korea have surprised the market with their decisions to reduce interest rates.

In a recent article, two economists Tom Orlik and Fielding Chen of Bloomberg commented: `The strength of the US dollar is China’s weakness.`

Henderson said central banks in Asian countries are encouraging businesses to reduce debt in USD or take measures to prepare before the FED raises interest rates.

Pesek believes that both central banks and policymakers should proactively find solutions to stabilize the economy.

Maybe the story of 1997 will not repeat itself in Asia.

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