Central banks devaluing currencies evoke memories of 1997 Asian crisis

London

THE pace at which central banks from Argentina to Azerbaijan surrendered their grip on exchange-rate policy this year is bringing back memories of the 1997 Asian currency crisis. At least four dollar pegs have been abandoned and half a dozen others weakened as developing nations scrambled to adjust to an era of lower commodity prices, slowing growth in China and higher US interest rates. The devaluations gathered pace in the second half after policymakers in Beijing surprised the world by depreciating the yuan on Aug 11, putting pressure on regional trade partners to follow suit.

A year that began with Vietnam depreciating the dong has culminated in Argentina and Azerbaijan's decisions to give up control of the peso and manat, respectively, in quick succession in December, with the currencies plummeting about 30 per cent on their free-float debut.