A battle has started for Asian currencies to safeguard their value against the USD. Pakistan Rupee has been low sustainably below 280 since this year. Indonesian Rupiah hit a four-year low against the dollar on Friday. The Japanese yen and the MSCI Emerging Market Currency Index fell for five consecutive trading days.
Prolonged US inflation and delayed prospects for rate cuts, fuelled by escalating tensions in the Middle East, have been pushing the USD value to an unexpected high, hurting Asian currencies.
However, research by KTrade Securities found that in the long term, USD will go through a downward cycle in the next few years pressed by fiscal and current account deficits. The delay of expansionary monetary policy will only balloon up the risks when it is finally put in place someday.