Strong US dollar complicates outlook for Asia

WHEN the Malaysian ringgit depreciated precipitously at the onset of the Asian financial crisis in the late 1990s, I feared inflation would quickly spiral on the back of rising import costs. Instead, there was a deep recession and domestic demand collapsed.

This past week, the ringgit made headlines as it weakened against the US dollar to levels not seen since the darkest moments of that crisis 25 years ago.

An obvious reason for the ringgit’s weakness is the renewed strength of the greenback against most currencies since the middle of this year, amid expectations that the US Federal Reserve will keep rates higher for longer in order to quell inflation.