While all eyes are on the birth of the euro, a region not so long ago written off is quietly rebuilding. In Thailand, interest rates are falling 25 basis points a week. The Republic of Korea looks likely to be upgraded as its current account swings from a 1997 deficit of $8.2 billion to a projected surplus of $40 billion in 1998 - a change equivalent to 16% of GDP. Even in Malaysia - where the situation is complicated by the regulatory environment - the stock market is booming. What they said could not happen is happening. Asia is exporting its way out of trouble.
The great unknown in Asia is still Japan, and in this month's issue David Roche paints a bleak picture of a bankrupt government and collapsing currency. Right now though, the yen isn't listening. The world's largest trade surplus and rapid convergence of US and Japanese interest rates - which makes it less unattractive to hold JGBs - are keeping the currency strong. In the long term perhaps the yen will collapse. In the short term it may be worth betting on strength.