Assessing Currency Vulnerability

July 2008 | Economic Analysis

Asian economies are finding it increasingly difficult to cope with the unprecedented strength currently being witnessed across the commodities universe - in particular the soaring cost of oil. Surging global food and energy prices have pushed inflation to multi-year highs across the region, and are generating mounting balance of payments concerns, both of which have caused regional currencies to suffer sharply of late. Moreover, with central bankers remaining reticent to sacrifice economic growth for the sake of taming inflation, Asia finds itself largely behind the curve with respect to monetary tightening. This is merely exacerbating the already considerable downward pressure on Asian currencies.

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