Exchange Rates

According to economists, there are five main reasons for the currency crisis in Southeast Asia and the IMF in July 1997 that caused over a period of economic turbulence and turmoil in the financial markets in Southeast Asia. The countries that were affected, especially during the crisis, including Thailand, Indonesia, Malaysia and South Korea. Inadequate reserves have, improper handling of appropriations and underdeveloped financial sector in the developing countries of Asia as the main reasons for the decline in the exchange rate of local currencies against the dollar was identified during the period.

The overall result of the economic crisis began, because of false speculation. Speculators expected a decline in the growth of the international market and began to sell Southeast Asian currencies. With this there was a devaluation of the currency and sudden depreciation of the Thai baht, Malaysian ringgit, Philippine peso and the Indonesian Rupiah. For this reason, had all these markets to sell their dollars to buy their currency. This led to a rapid decline in foreign exchange reserves. In the second phase of the crisis that affected the lowest value of the currencies of the other neighbors in South Asia currencies such as the Taiwan dollar, Korean won, Singapore dollar and Hong Kong dollars. Governments raised interest rates to defend the national currency and the invitation of foreign capital participation. Due to the rapid decline of the economy began to attract investors, their investments in the markets and led to a decline in stock prices. IMF with the World Bank and Asian Development Bank organized programs to support approximately 120 billion dollars to save these markets.

Some economists believe that the macroeconomic policy and distorts the fixed exchange rate of the currency as one of the main causes of the economic crisis in 1997.

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