Argentina broke its supposedly irrevocable currency peg to the dollar a few months later.
China's peg to the dollar has long provided an important anchor for the region.
China's monetary policy must also be guided by the need to maintain the yuan's peg to the dollar.
At the time, private investors were selling in the belief that Hong Kong would have to abandon its currency peg to the dollar.
The obvious step to take would be for China to break the peg to the dollar, which would effectively begin another chapter in monetary history.
Years of following IMF policies and a hard peg to the dollar caused the meltdown, as Argentina saw its currency devalue 400% and its economy plunge.
Already Italy is being compared to Argentina, where a currency peg to the dollar made exports uncompetitive, sparking a recession and, ultimately, a fiscal crisis that forced the country to ditch the peg and devalue the peso.
The same is true of China, which has a currency peg to the dollar and is thus fully exposed to the rising oil price, and has also, like many other developing countries, become much more reliant on oil in recent years as their economies have moved from agriculture to heavy manufacturing.
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The Central Bank of Iraq recently broadened the range of tactics it uses to mop up excess liquidity in the system and maintain the dinar's de facto peg to the dollar, which, given the primitive state of Iraq's financial system, is the best mechanism the bank has to keep prices stable.
The same is true of China, which has a currency peg to the dollar and is thus fully exposed to the rising oil price, and has also, like many other developing countries, become much more reliant on oil in recent years as its economy has moved from agriculture to heavy manufacturing.
Indeed, the territory's financial secretary, Antony Leung, gave warning that the Hong Kong dollar's longstanding peg to the American dollar might come under strain if the SARS outbreak is not resolved soon.
In truth, a gold exchange standard would be as simple as Treasury announcing a plan to peg the dollar to a set gold price, after which the market price of gold would regulate the supply of money.
At the time, private investors were bailing out, in the belief that Hong Kong would have to abandon its currency peg to the American dollar.
An even bigger constraint on China's monetary policy is that it continues to peg its currency to the dollar.
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Thus, in one sense, have Asian countries ignored the lessons of their financial crisis in 1997-98, which erupted in large part because they tried to peg their currencies to the dollar to keep exports strong and damn the long-term consequences.
Is he bothered by the peg of the yuan to the dollar, something a good number of countries similarly pursue?
The interim president said he would not devalue the national currency, the peso, nor end its peg to the US dollar - seen by financial analysts as alternative ways to deal with Argentina's enormous economic problems.
We should urge countries to re-peg their currencies to the dollar.
The controls were accompanied by a move to peg the ringgit at 3.8 to the dollar about 10% stronger than the market rate at the time.
The third and best option would be to switch the yuan's peg from the dollar to a basket of major currencies in an arrangement similar to Singapore's.
By extension, a modest decline of the yuan back to its original peg of 8.7 to the dollar should not have huge effects on the region's trade.
Given this timidity, China could replicate much of the flexibility of a managed float by shifting the yuan's peg from the dollar to a basket of currencies, at the same time widening the band within which the yuan can fluctuate, say to 10% above or below the peg.
ECONOMIST: China should loosen its currency peg��and quickly
In July, American nagging helped persuade the Chinese to move the yuan from its dollar peg and peg it to a mixed basket of currencies, bringing a 2% revaluation in the process (though that has not stopped a Democratic senator, Charles Schumer, from threatening a 27.5% tariff if the yuan does not rise more).
At the same time, Fed looseness has caused headaches for countries, such as many Gulf states, that peg their currencies to the dollar.
Since China and Malaysia peg their currencies to the dollar, and many other Asian countries track it closely, Japan and the euro area would bear the brunt of the dollar's fall.
As long as countries try to simultaneously follow inflationary policies at home and peg their exchange rates to the dollar, we will continue to have these currency crises.
On July 21st, China tried to allay some of the criticism by revaluing the yuan slightly and switching its peg from the dollar to a basket of currencies.
What do you think about Hong Kong's recent intervention in the stock market to protect the dollar peg?
Speculative hedge funds - "crocodiles, " Tsang calls them - had attacked the Hong Kong dollar's peg to the U.S. greenback several times since the start of the Asian Financial Crisis.
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