NEW YORK (NEW YORK TIMES) - China's decision to push the value of its currency lower has opened a new front of worry for global investors: a potential wave of currency devaluations among the so-called Asian tigers, namely South Korea, Singapore and Taiwan.
Such an outcome, say foreign exchange experts, will put a further damper on global growth forecasts, which are already being revised downwards as China's once-booming economy retrenches. The US dollar's strong run recently - together with the plunge in the price of oil and other commodities - has damaged fragile emerging-market economies such as Brazil, Turkey and South Africa.
The currencies of fast-growing Asian countries, including India, have largely been insulated, thanks to their better-performing economies and their ability to stockpile large foreign currency reserves.
But having a strong currency at a time when manufacturing rivals like Japan and China have weaker currencies leads to a sharp fall in exports, the economic lifeblood of these Asian economies.
"These countries have some of the most overvalued exchange rates on the planet," said Mr Julian Brigden of Macro Intelligence 2 Partners, an independent research firm based in Vail, Colorado.
When economies have high exchange rates, their exports tend to lose market share. And when that happens, countries that depend on foreign trade will frequently take steps to push their currencies lower.
Echoing these fears, Mexico's Finance Minister, Mr Luis Videgaray, warned last Thursday that the Chinese currency actions could lead to a new round of competitive devaluations.
The fear is that a currency war in South-east Asia, where the Asian financial crisis erupted in 1997, could result in lower growth and add to concerns about the global economy this year and next.
The World Bank last week lowered its global growth estimate to 2.9 per cent from 3.3 per cent.
Already, global money managers have begun to pull money out of some of these Asian markets.
The Korean won and the Singapore dollar are down 5 per cent, while the Taiwan dollar has lost 7 per cent over the past six months.
Underpinning the fears about a currency war are disappointing export figures from the region.
For example, Korean exports fell 14 per cent in December, compared with the same month in 2014. For the year, exports shrank 8 per cent.
In Taiwan, officials say they expect exports for last year to have fallen 10 per cent.
And in Singapore, the manufacturing sector slumped 6 per cent in the most recent quarter.
With China, their main export competitor, expected to let its currency weaken further, these economies will face further pressure to let their currencies fall.
The sudden export drop-off for manufacturing powerhouses, like South Korea and Singapore, troubles analysts who see it as a sign that the global economic slowdown is worse than people expect.