Impact of Dollar Shock on Asian Economies

trade is crossing some official's line in the sand, but how this could potentially spill over

right out of everyone's control. So the real story is not one currency, whether yuan, yen,

rupiah, or rupee. The real story, as always, is dollar, as an escalating dollar shock. Asia's

currencies are falling because these economies need the dollars at a time when dollars are

becoming more expensive and harder to secure. Oil prices and geopolitical stress are making

the problem that much worse. Trade uncertainty is amplifying the strain. Capital flow pressure

is making everything worse. And the more the currencies fall, the more officials are forced

to act. But their actions reveal the problem. They don't solve it. If everything were fine,

South Korea wouldn't be launching the first joint inspections of major FX banks in 14 years. Japan

would not be burning through tens of billions only to see JPY fall right back to 160, below 160.

Indonesia would not be holding an emergency unscheduled rate hike as it also burns through

its foreign currency reserves. India wouldn't need its local banks to offer deposit rates

well above comparable U.S. treasury yields just to try to attract some non-resident money back

into the country. These are all signs of significant stress. And the danger, again,

is that currency weakness becomes financial volatility. Financial volatility becomes

greater capital flight. And greater capital flight becomes tighter credit and then even

more recessionary and depressive across much more than just Asia. That is the feedback loop that

policymakers are trying to prevent. But it's not up to them. Because if the dollar shock continues

to escalate, this thing is not going to remain contained either within Asia or within specific

sectors of the financial system. The more that policymakers and officials and authorities feel

they have to do, the worse you know it's getting to be. And right now, authorities across Asia

are getting desperate. And all of these things feed into what we're seeing as far as some

interesting and odd twists and turns in the curves that we follow. And those are all in

the video link below. As always, thank you very much for joining me. Join me June 28th for our

Eurodollarversity members and subscribers. And until next time, take care.