The Asian Development Bank (ADB) warned that a rise in U.S. bond yield could trigger an Asian currency and debt crisis like the previous ones, hitting emerging markets hard.
ADB President Masaru Asakawa said that developing Asian countries have issued a large amount of dollar-denominated debt to finance the fight against the new coronavirus (Chinese communist virus) Epidemic. But if the U.S. bond yield continues to rise, triggering a collapse in the exchange rate of emerging Asian currencies, may trigger capital flight and the risk of debt default.
Asakawa said in an interview this week: “Past experience shows that as long as the U.S. bond interest rate rises, emerging and developing markets will be greatly impacted by the funding market”, “We are very concerned about the possible risks associated with a large increase in debt”.
Asakawa Masaru is not the only one who holds these doubts. Long before the U.S. bond yield jumped this month, the world’s debt was approaching record high levels, which has led the International Monetary Fund (IMF) to warn.
Indonesia rupiah and Thai baht in the past month have plunged more than 2%, but most investors believe that Asia this Time the bottom of the foreign exchange reserves more robust, will help to avoid suffering similar damage to the previous crisis.
Asakawa said that the lender countries in the provision of debt relief this aspect of the approach appropriate, these countries are based on the Group of 20 (G20) in March last year to develop the structure to act. He said lending and borrowing countries should work to improve transparency, strengthen the banking system, and create a regional financial safety net.
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