Foreign exchange reserves fell by 6.2%, a total of $372 billion, during the first half of 2022. This is the largest six-month decline since the six months ending January 2016.
Thailand suffered the largest decline of 10.4% to $201.4 billion for the six-month period ending June. Following closely behind was the Philippines, where reserves declined by 7.3% to $100.9. Both India and China tied for third place, with both nations’ reserves sliding by 7.3% to $100.9 billion.
This dramatic fall largely shows a failure of policymakers to effectively defend against the constant downward pressure being applied by the strengthening US dollar.
Alex Holmes, the senior economist at Oxford Economics, noted that while many Asian countries favor a weaker currency due to their large export operations, such a rapid decline will be a cause for concern.
“The big added factor is that most countries are now battling decade-high inflation, and that’s a problem that’s compounded by having a weaker currency,” Holmes elaborated.
While Asian nations have vastly strengthened economically since the 1997 Asian financial crisis and the taper tantrum of mid-2013, nations such as India, Thailand, and the Philippines remain vulnerable due to running account deficits.