Source: Financial Times                           Date: 29 september, 2011

It seems Asian currencies finally got the news that there' is economic crisis in the rest of the world. Last week's steep decline in Asian currencies proved that Asia is not invulnerable to the economic crisis originating in the west.Fears that the United States will fall back into recession and the European is amidst a debt crisis are finally reaching the eastern world. Until just recently, Asian currencies were performing well. However, an index of 10 Asian currencies complied by JPMorgan and Bloomberg fell 2.1 percent against the U.S. dollar last weeks, lower than when it started this year. India's rupee declined 4.7 percent to a 28-month low, in addition to declines for Malaysia’s ringgit by 3 percent, and the South Korean won by 4.7 percent.Many central banks in Asia were buying up their currencies foreign exchange markets this week to control the decline. However, banks founds themselves overwhelmed the surge of selling from investors.“The reality is that it does not matter how confident we or anyone else may be on the medium-term outlook for China and the rest of Asia,” said analysts at the research firm Gavekal.“If there is a recession in the U.S. in the next 12 months or a major default event in Europe, Asian markets will continue to fall, in tandem with the U.S. and Europe, despite the higher growth prospects.”Read more.The strong appreciation of the China's yuan finally gave way to the global rush for dollar liquidity. Although the yuan was the favorite within China, it fell by more than 2 percent abroad. Traders reason Asian currencies will continue to struggle until western nations are willing to trade again.The situation could grow even worse if the liquidation in currencies spread to the foreign bond market. If this were to occur, Asian currencies would likely fall even further.