ABSTRACT
At the beginning of the twenty-first century, the international financial architecture is characterized by continuing change. Perhaps the most profound difference compared with the preceding decade is that dollar hegemony can no longer be taken for granted. The successful introduction of the euro resulted in increasing competition for the dollar, and consequently the world is currently moving to a bipolar monetary arrangement (Bergsten 2005: 4). These changes are a challenge for East Asian and Southeast Asian countries. First, they demonstrate that monetary regionalism and the creation of a single currency is possible in practice, not just in theory. Second, Asia’s traditional reliance on the dollar – as an external anchor for exchange rates, a reserve currency as well as the main invoicing currency – has to be evaluated from a new perspective. Is it sensible to tie one’s currency to the dollar? Is the accumulation of dollar reserves a wise strategy? In addition, is it useful to continue emphasizing the ties to the dollar when the United States is confronted with an unsustainable balance of payments, the result of which will probably be a severe reduction of imports within the coming decade?
