Asian governments have been fighting a rearguard action to hold down their currencies. They have stopped external surpluses from fuelling domestic inflation. But they are at their limits.
The dollar’s recent slide seems to have been triggered by the news that China had decided to raise its interest rates. That set the markets speculating that the Chinese renminbi would be detached from its peg to the dollar. And if the renminbi appreciated against the dollar, other Asian currencies would follow suit.
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