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Asian currencies set to be weaker for longer
High US interest rates and yen and yuan weakness keep a lid on the region’s currencies, but a repeat of the 1997 Asian crisis is not on the cards.
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A monitor outside a Tokyo brokerage showing the Topix and Nikkei indexes and the Japanese yen exchange rate against the US dollar on July 4.
PHOTO: REUTERS
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Most Asian currencies have been tumbling against the US dollar in 2024 and with the US Fed Funds rate stuck at 22-year highs, they don’t look like they’ll be bouncing back anytime soon. This seems like a flashback to the Asian financial crisis of 1997 and 1998, when currencies crashed in unison, unleashing economic turmoil across the region.
While it won’t be so bad this time because of buffers that have been built since then, there are new forces in play that could cause problems of a different kind: Asia’s two anchor currencies, the Japanese yen and the Chinese yuan, are now also a big part of the story, which wasn’t the case during the Asian crisis.
