A currency crisis could result if the region stops buying the dollar
The fate of the US economy could rest in Asia's hands, regional economists suggested yesterday.
While Asian central banks buy US dollars to stop linked currencies from rising in value, US debt repayments will be adequately serviced, they said. But problems could arise if China, Japan and other nations with pegged economies lose confidence in the US.
Some analysts warn that this may be starting to happen as the US dollar weakens against the world's major currencies.
Shane Oliver, the chief economist and head of investment strategy at Australian-based AMP Capital Investors, believes US President George W. Bush's administration caused the budget deficit blowout to stimulate economic growth.
Dr Oliver expects the deficit to be brought under control in the longer term, although Asian economies will also have to play a part. 'If Asian countries fail to provide support, the US will continue to require large amounts of global capital to finance its borrowings,' Dr Oliver said from Sydney.
'To date, they've been getting a lot of that, with Asian economies reluctant to stop exchange rates from rising.'
