US dollar risk and Asia's capital flow

The risk of a US dollar crash is contained and Asia will remain a net capital exporter in the medium-term.

The market is increasingly concerned about a potential US dollar crash because the bulging US current account deficit is unsustainable and will have to be normalised soon. Even the IMF has warned that the US deficit is an accident waiting to happen because that deficit requires a continuing flow of investment funds into the US, and those funds will keep flowing only if the investment opportunities are not thought to have diminished. But the market is having doubts about superior returns in US investments.

If the IMF warning is right, Asia will be in for some nasty shocks because the US is Asia's largest export market outside the region, and a US dollar collapse...

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