One plausible cause of the "Asian currency crisis" of 1997 is that,from mid-1995 to 1997,the U.S.dollar appreciated against the Japanese yen and other currencies,and this __________ the currencies of the East Asian countries whose currencies were fixed to the U.S.dollar.The result was larger ___________ in these countries under fixed rate regimes,which triggered speculative attacks against the currencies because currency traders anticipated an eventual ___________ of the currencies.

Question

Quizplus · Accepted Answer

When the U.S. dollar appreciated against other currencies, including the Japanese yen, the currencies of the East Asian countries, whose currencies were fixed to the U.S. dollar, also appreciated. This led to larger trade deficits in these countries under fixed rate regimes because their exports became more expensive while imports became cheaper. This, in turn, triggered speculative attacks against the currencies as currency traders anticipated an eventual devaluation of the currencies. Therefore, the best choice is C, where the U.S. dollar strengthened, trade deficits increased, and the eventual outcome was devaluation of the currencies.

One Plausible Cause of the "Asian Currency Crisis" of 1997