A sudden devaluation, if it gathered momentum, might overshoot. Then the national authorities would have no alternative but to hike interest rates, amplifying the pain. To moderate these risks, what was warranted was not a rigid defense of a particular currency peg, but intervention to moderate the pace of exchange rate movements. For this the authorities needed ample foreign exchange reserves. From the beginning of the millennium, China’s reserves rose to a peak in 2014 of $4 trillion. No one could match that, but Thailand, Indonesia, Russia, and Brazil all accumulated large foreign exchange
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