Recently, with the fall of Yen and Yuan continuously against dollar, experts in various media such as Bloomberg warned for the possibility of the coming Asian currency crisis like what happened in 199.
The 1997 Asian currency crisis in four stages according to the development process. In the first stage, the foreign exchange crisis in Thailand has been transmitted to neighboring Southeast Asian countries such as Singapore, Indonesia, Malaysia, and the Philippines.
After Thailand abandoned its exchange rate defense and shifted to a free floating exchange rate system, the Philippines, Malaysia, and Indonesia followed the same path. The second stage is when the Southeast Asian currency crisis is transmitted to Northeast Asia.
When Taiwan’s New Thai Waller (NTD) was attacked, Taiwan’s central bank, which had already adopted a floating exchange rate system, easily abandoned its exchange rate defense. Hong Kong was then attacked and the Hong Kong stock market plunged, sparking a fire in South Korea, which relied heavily on short-term debt from Hong Kong.
The third stage is when Indonesia has become the center of the crisis, with Thailand, Malaysia, the Philippines, and South Korea escaping from the currency crisis. The fourth stage is the stage where the crisis in Asia is spreading worldwide. Along with the economic recession in Asia, the trade balance between Russia and South America, which supplied natural resources to these regions and relied heavily on exports, deteriorates.
This again led to the escape of funds by international investors, and Russia declared a moratorium. The crisis spreads to Eastern Europe and South America, leading to a global recession.
