'E. Asia must prepare for possible dollar collapse'

[Ulhas Joglekar <joglekarulhas@xxxxxxxx>]

The Hindu
http://www.hinduonnet.com/

Wednesday, Mar 29, 2006

Business

'E. Asia must prepare for possible dollar collapse'
http://www.hindu.com/2006/03/29/stories/2006032905401700.htm

TOKYO: With the U.S. trade deficit at a record high and global interest
rates rising, East Asian economies need to be prepared for a possible
'collapse' of the dollar, the Asian Development Bank warned on Tuesday.

"Any shock hitting the U.S. economy or the global market may change
investors' perceptions given the existing global current account
imbalance,'' said Masahiro Kawai, ADB's head of regional economic
integration. "Our suggestion to Asian countries is: do not take this
continuous financing of the U.S. current account deficit as given. If
something happens then East Asian economies have to be prepared,'' he told
reporters on a trip to Japan.

Because of the highly interdependent nature of the East Asian economies, if
countries worked together to allow their currencies to collectively
appreciate against a tumbling dollar then the cost of adjustment would be
spread, he said. "The possibility of a U.S. dollar collapse or sharp decline
may be small at this point but it would generate very significant turmoil so
East Asian economies... ought to be ready for that,'' Mr. Kawai said.

The Manila-based ADB is working on several indices of Asian currencies that
could be helpful to monitor exchange rate movements in the case of a sharp
dollar decline, though its main aim is to help develop regional bond
markets. - AFP

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