Exchange-rate weakness is one reason central banks, including in China and South Korea, have been wary of lowering interest rates, even though price pressures across emerging Asia have largely been lower than in most major advanced economies.
The global market selloff may have a silver lining for Asian central banks if sustained weakness in the dollar gives them leeway to ease monetary policy.
Asian currencies shot up to a five-month peak against the greenback this week, amid tectonic shifts in global markets due to a range of concerns — not least worries that US rate setters have been too slow to ease policy. Malaysia’s ringgit led the charge in emerging Asia on Monday, followed by the long-beleaguered Chinese yuan. Bloomberg’s index of Asian currencies was softer on Tuesday.
