Riots and resignations in Buenos Aires were not enough yesterday to panic Asian money markets inured to crises in Argentina. But traders said that, in light of the weakening yen, it was another headache no one needed. Hong Kong dollar forwards jumped on news that Economy Minister Domingo Cavallo had resigned following riots that began on Wednesday in protest against fresh austerity measures. The one-year US dollar forward rate hit a day's high of 250 basis points above the spot rate, from 170. It settled later in the afternoon at a premium of 230. Traders said Argentina was just salt in the wound of the weak Japanese yen, which has been pressuring currency markets in Asia. Regional bonds were steady and most regional stock markets gained after a bounce on Wall Street overnight. The relative calm reflected fatigue in Argentina after a series of crises. But it also shows that contagion now comes in less viral strains than it did in the 1990s, which hosted the 'tequila effect' of the Mexican peso devaluation, the Asian crisis and the rouble devaluation. 'Markets are more sensible nowadays,' said ABN Amro head of Asian economics Eddie Wong. 'They can distinguish the problems of Argentina from most other countries.' One key difference compared with Hong Kong is that Argentina has a huge external debt and its populace fears keeping its money at home; the SAR has little debt and its banks are turning away depositors. The two have been linked because they both have a currency board system and a break of Argentina's peg to the dollar could send speculators to Hong Kong's doorstep. Devaluing would be a tragic policy step for Buenos Aires as it would make US dollar debt even harder to pay while having limited economic benefit. This is because exports are not a large part of gross national product. Argentinian concerns generally take their toll on Hong Kong's stock market since its biggest constituent, HSBC, has assets worth US$5.74 billion in Argentina, including US$1 billion in long-term government debt. HSBC yesterday fell 1.05 per cent to HK$93.50, against a 0.31 per cent rise in the Hang Seng Index to 11,601.14 points. The costs in Hong Kong's banking system were slightly higher. Every 100-point rise in the premium on the Hong Kong dollar reflects a 13-basis-point rise in comparable interest rates, according to ING Barings. A few years ago, rioting and resignations in Argentina might have encouraged speculators to sell down the Hong Kong dollar. But changes to the monetary system in 1998 removed speculative elements from the market. One key change implemented in 1998 was the provision of short-term liquidity to banks in times of cash exodus. The real-time settlement system introduced last year also allows the monetary authority to keep a better eye on banks, discouraging activity that could upset the system, traders said. Financial Secretary Antony Leung Kam-chung did draw one parallel between Argentina and Hong Kong yesterday. With revenues declining in the economic downturn, Mr Leung said Hong Kong should not issue government bonds to pay for public expenditure as some legislators have advocated. Otherwise the SAR could end up in the same boat, he said in a speech last night to Chinese manufacturers.