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Currencies

Asia's 'dollar buffer' should not be taken for granted

Weak greenback insulates region from US rate hikes but that may not last

| China

Markets have been buffeted by recent economic headwinds. Faster-than-expected-wage growth in the U.S. was the spark that sent markets around the world into a tailspin, igniting worries about growing inflation pressures, and fanning expectations that the U.S. Federal Reserve may need to douse an overheating economy with a rapid succession of rate increases.

The accompanying spike in U.S. long-term interest rates is of particular concern for Asia: After years of credit-fueled growth, the region has become vastly more sensitive to changes in funding costs. Even a small uptick in interest rates could slow demand as companies and households need to put more money aside to service their debt, leaving less for other purchases.

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