BOAML highlights potential for currency mismatches

Kuala Lumpur

BANK of America Merrill Lynch (BOAML) has flagged a rising proportion of foreign-currency public debt issuance in Malaysia and Indonesia and warned of implications for financial stability and macroeconomic policy given the potential for currency mismatches.

Currency misalignments - a key vulnerability that exacerbated the Asian financial crisis of 1997-98 starting with the attack on the Thai baht - appear to be re-emerging as governments are forced to opt for more foreign-currency debt financing because of a surge in local bond yields and diminishing foreign interest.