SEOUL, Nov. 25 (Xinhua) -- Strong U.S. dollar is the biggest threat to the Asia bond market, including South Korea, as the dollar strength raises Asian countries' debt burden denominated in local currencies, an Asia Development Bank (ADB) economist said Tuesday.
Iwan J. Azis, head of the ADB's office of regional economic integration (OREI), told the Asia Bond Monitor seminar held in central Seoul that a rise in U.S. interest rates and its consequent dollar strength would change the capital flow of foreigners in and out of the Asia bond markets.
Azis said the strong dollar would inevitably raise debt burden denominated in local currencies for Asian countries, noting that South Korea's currency declined 5.7 percent from July to October to the dollar and posted the biggest fall among its East Asian peers.
Amid expectations that the U.S. Federal Reserve may raise its benchmark interest rate in the second half of 2015, South Korea's central bank cut the policy rate in August and October to a record low of 2 percent.
It raised concerns that the rate cut in South Korea may trigger a foreign capital outflow from the local stock and bond markets as the South Korean currency's fall to the dollar would increase foreign exchange losses of foreign investment amid the strong dollar trend.
Azis expected the strong dollar trend to become stronger amid expectations for the Fed's rate increase next year and boost the depreciation of East Asian currencies further to the dollar.
The South Korean currency-denominated bonds outstanding were 1. 7 trillion dollars as of end-September, up 2.4 percent from three months earlier and up 8.4 percent from a year earlier. It marked the third-biggest market after China and Japan.
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