What is behind the recent currency weakness?

Sizeable falls in a number of Asian currencies against the US dollar over the past month have rekindled unwelcome memories of last summer’s “Taper Tantrum”. As was the case during last year’s sell-off, the Indonesian rupiah, has been one of the hardest hit Asian currencies this time around, although the Malaysian ringgit and the Korean won have also experienced relatively big falls. However, unlike last year when it was mainly EM currencies that were hit hard, developed world currencies such as the yen, euro and sterling have also experienced significant declines against the dollar this time. The main factor behind the recent weakness appears to be a rise in US interest rate expectations in response to the general strength of the US economy.