Malaysia last week let the ringgit slide. The Indonesian rupiah and even the once-solid Singapore dollar have also come under fierce attack. All you can do is try and make sure you're not holding the currency that's next on the firing line. The turmoil in currency markets is part of a dramatic shift for Southeast Asia's economies. But the transition has clear costs.
Inflation is sure to rise.
And, at least in the short term, the economies can expect higher interest rates and a slower pace of economic growth. For Thailand, which overdosed on cheap foreign loans encouraged by its fixed exchange rate, economists are dramatically lowering their GDP forecasts. Despite the short-term pain, economists generally agree that Asian countries are taking the steps they should have a long time ago. Since the 1980s, governments have linked their currencies primarily to the dollar, mostly to allow exporters the luxury of a stable exchange rate with the U.S., their major customer. The policy worked well for years as exports soared.