Asia's Currency Markets Now More Interconnected, But Still Vulnerable

Asia's currency markets have undergone significant changes since the 1997 crisis. The region is no longer concentrated on individual currencies, and risk has dispersed more widely.

According to a study by Corvinus University of Budapest's Institute of Finance, the Japanese yen remains a prominent transmitter of regional shocks. It accounted for an average contribution of 14.74% to modelled risk measures between January 2022 and September 2025, a rise of approximately 96% from October 2018, December 2021.

The study examined daily exchange-rate data for ten East and Southeast Asian currencies over two periods: the crisis-era window (1994-2000) and the recent period (October 2018-September 2025). The results show that during the earlier period, individual currencies like the Thai baht and Indonesian rupiah dominated regional risk. In contrast, the recent period presents a broader distribution of risk across several currencies.

The authors propose combining domestic financial assessments with regular monitoring of cross-currency relationships to better prepare for regional risks. They suggest incorporating their measures into ASEAN+3 surveillance and the Chiang Mai Initiative Multilateralisation framework.