Confidence is already beginning to come back. The rupiah closed at 7,200 to the dollar on Jan. 14. The baht, ringgit, peso and other currencies also strengthened, along with stock markets in Bangkok, Manila, Kuala Lumpur and Singapore. But everyone knows it is a fragile recovery. When the euphoria dissipates from the more realistic IMF approach and the renewed commitment of governments to reform, the markets will focus once again on the painful problem of implementation.
Analysts caution against putting too much importance to the apparent calm.
There are enormous hurdles to overcome in Indonesia and Korea, and to an extent, in Thailand too. And they are not only economic. Indonesia is the most vulnerable to political and social unrest, given the absence of a successor to Suharto and the ever widening gap between rich and poor. Then we will see another round of speculation against Asian currencies. The Hong Kong government vows to defend the peg at all costs.