sia. This was subsequently followed by widespread panic and capital outflows when the currency crisis occurred. Amid the multitude of explanations of the causes of the crisis, a number of factors could be seen as triggering or creating the adverse conditions for a crisis to erupt and subsequently to become The downward adjustments in the regional currencies against the US•prolonged: dollar, to a certain extent, reflected the global realignments in the exchange rates of the major currencies vis-จค-vis the US dollar, particularly in the case The build-up of•of the Japanese yen and the Deutsche Mark since 1995. vulnerability of domestic currency to external shocks. Three areas of concern were identified: (i) The general export slowdown in the region since 1996 raised fears that the current account deficits of the regional economies would deteriorate further, thereby exerting pressure on the currencies. The expectations of the downward adjustments in the currencies were fuelled by the fact that the export slowdown was prompted not only by cyclical factors but also by structural factors that contributed to the lost of export competitiveness. (ii) The financing of the regionกฏs current account deficits also heightened risks, as the maturity structure of the capital inflows changed from long-term foreign direct investment (FDI) to short-term portfolio funds and loans. The build-up of such investments in the domestic economy can make a country vulnerable to a sudden reversal of flows. (iii) Accumulation of external debt by the private sector particularly of short-term maturity. Prior to the crisis these debts were easily repaid due to strong export performance and strong growth in domestic revenues. In addition, risks of foreign exposure were minimal As the crisis deepened, market•as exchange rates were previously stable. concerns shifted to the stability of the banking system. T...