South-east Asia’s sinking currencies raise spectre of ’97/98 financial crisis

SOUTH-EAST Asian currencies have been whiplashed, losing between 1 and 7 per cent this year against a “smiling” US dollar. Persistent inflation, robust growth in the world’s largest economy, and escalating geopolitical tensions have driven a flight to the safe-haven greenback.

Rising oil prices, a persistently feeble yen and a weak yuan fixing have exacerbated declines, pushing some regional currencies to multi-year lows. If this persists, it could evoke the spectre of the late-90s’ Asian financial crisis (AFC), which was sparked by battered currencies.

But, pundits say, the events unfolding now are not quite the same and a crisis akin to the AFC is unlikely.