ABSTRACT
Since the middle of 1980s, some countries in the south Asian region had experienced rapid economic growth in the range of seven to 8 per cent per annum. Most of these countries have a liberal exchange rate regime, and they took advantage of their export expansion and huge inflow of foreign capital. Hong Kong and Singapore became two strong offshore financial centres apart from Tokyo. Over the years, this region also had become a centre of ‘Geo Finance’ holding a huge amount of international reserve. By June 1997, international reserve of Japan was USD 222 billion, China had USD 121 billion, while Hong Kong had USD 82 billion. To what extent this economic muscle of these three countries affected the strength of the currencies of countries like Thailand, Malaysia, Philippines, and Indonesia remains a matter of conjecture. There is a debate in the literature that the North American free trade bloc NAFTA may have been responsible for the weakness of the Mexican peso, as Mexico is the weakest in the bloc (Torres, 1994). If it is true, one can draw a parallel in the case of the south Asian trade bloc where major economic powers like Japan, China and Hong Kong might have contributed to the weakness of the currencies of the fellow countries. We are to remember that all these countries were pursuing a strategy of economic development that was known as export-led growth. Or, they depended heavily on exports.
