cceeded in buying the currency at cheaper rates they would make an instant profit. The Asian governments tried to resist the need to devalue currencies by making deals with the moneylenders. The moneylenders sold local currencies to the banks for US dollars, but the bank's stock of US dollars had to diminish eventually. It was Thailand who first ran out of their US dollar reserves, so therefore had to let her currency devalue. Malaysia then followed suit. Hong Kong, however, was able to resist the devaluation for longer because they had more US dollar reserves. Hong Kong had enough reserves but they would have a very hard time trying to keep the Hong Kong dollar pegged to the US dollar. This caused their stock markets to crash and their market to be uncompetitive. To make the Hong Kong dollar attractive they would have to keep the interest rate therefor business would slump. (see why did it happen?) Another article; Four myths of the Asian economic crisis. 12-18 January 1998. Web site www.newaus.com, disagrees with the view that pegged currencies is one of the problems. The article states that pegging currencies cannot be damaging as long as they are pegged at their market rates. It says that the only way a problem could arise is if the currency of an economy begins to inflate against the currency to which it is pegged. The countries will then begin to experience ...
