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Friday, January 2, 1998 Published at 08:11 GMT


New year, same problems for Asian currencies
image: [ The start of 1998 brings little cheer to traders in the Far East ]
The start of 1998 brings little cheer to traders in the Far East

Malaysia's currency has fallen to a record low as the new year brings familiar worries to south-east Asian markets.

The Thai baht and Indonesian rupiah also dropped sharply on the first day of trading in 1998 on Friday.

The Malaysian ringgit hit 3.935 against the US dollar, the baht almost reached its previous record low of 48 and the rupiah fell to around 6,000.

A holiday kept the markets closed for another day in South Korea.

But the won will be under pressure when trading begins next week after out-going President Kim Young-sam warned South Koreans in a New Year message to expect more trouble before the country's economy starts to turn around.

Singapore analyst Alison Seng said: "The markets took the opportunity to sell the Asian currencies after hearing leaders in their New Year messages warning their people that things could turn for the worse before they become better."

The currency fall can be seen as a bad omen for south-east Asia, which saw a number of countries run into trouble during 1997 after years of success.

South Korea was forced to join Indonesia and Thailand in accepting a loan package from the International Monetary Fund as its the main stock market index fell 42.2% over the year.

The region's problems began with the devaluation of the Thai baht on July 2, 1997. Given Friday's continued currency falls, it may have some way left to go.

The Tokyo and Hong Kong stock exchanges were also affected by the collapse of the "Tiger" economies.

The Nikkei index ended the year at the lowest level since 1985 and the Hang Seng was down 19% on the year and 35% since the former colony reverted to Chinese rule.

Kevin Evans, a senior analyst with Panin Securitas, compares the Asian crisis to the great depression of 1929 in the United States.

"East Asia will record 1997 much as the world recorded 1929," he said.

"It was a year in which the assumptions of ever-onward prosperity were torn asunder."

Only the Taiwan Stock Exchange escaped the turmoil. Taipei gained 20% during 1997.

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