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* 1994- Mexican Peso crisis
* 1997- Asian currency crisis
* 1998- Brazil/Russia
* Weak financial systems
* Poor supervision and regulation
* Too much short term borrowing
* False security of stable exchange rates
* Once crisis struck, contagion effects because of interconnected financial markets.
* Tables now turned.
* Emerging market currencies looking strong now.
Emerging scenario
* Floating exchange rates can overshoot but allow country to retain independence as far as monetary policies are concerned .
* This freedom is however more limited than it looks prima facie.
* For example, Indian interest rates cannot be set completely independent of the Fed.
* Fixed rates mean subservience to monetary policies of another country.
* Emerging scenario- Two groups of countries
* Flexible exchange rates , relatively low level of integration into global capital markets.
* Fixed exchange rates- Tightly integrated into global capital markets, foreign ownership.
HK Dollar vs US Dollar : long term trend
Indian Rupee vs Dollar : long term trend
Yen vs Dollar long term trend
DM vs Dollar long term trend.
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Category : Financial ManagementTags: financial markets, global capital markets, global financial architecture, monetary policies