Several emerging market currencies in Asia are experiencing significant depreciation, hitting record lows or levels not seen in years. The ongoing monetary tightening by the U.S. Federal Reserve has strengthened the U.S. dollar, driving foreign capital back to the U.S. in search of higher returns. This capital flight is putting pressure on currencies such as the Thai baht, Indonesian rupiah, Philippine peso, Vietnamese dong, Malaysian ringgit, Japanese yen, and Korean won.
The Korean won, in particular, has suffered deflation worse than during the 2008 financial crisis. Export-oriented economies across Asia are feeling the strain as their currencies weaken, making imports more expensive and potentially fueling inflation.
In response, central banks in these countries are taking decisive action to support their currencies. Measures include intervening in foreign exchange markets, adjusting interest rates, and implementing policies to stabilize their economies during these turbulent times.
The ripple effects of the Fed’s policies highlight the interconnectedness of global economies. As the U.S. continues its monetary tightening to combat domestic inflation, emerging markets must navigate the challenges of capital outflows and currency devaluation.
Analysts suggest that the situation underscores the importance for emerging economies to strengthen their financial resilience and diversify their economic strategies to mitigate external shocks.
Reference(s):
cgtn.com
