4 During the Asian crisis, some local companies in Asia borrowed US dollars rather than local currency to support local operations. Why would they borrow US dollars when they really needed their local currency to support operations? Why did this strategy backfire?

The following discussion questions related to the Asian crisis illustrate how the foreign exchange market conditions are integrated with the other financial markets around the world. Thus, participants in any of these markets must understand the dynamics of the foreign exchange market. These discussion questions can be used in several ways. They may serve as an assignment on a day that the lecturer is unable to attend class. They are especially useful for group exercises. The class could be segmented into small groups; each group is asked to assess all of the issues and determine a solution. Each group should have a spokesperson.
For each issue, one of the groups will be randomly selected and asked to present its solution, and then other students not in that group may suggest alternative answers if they feel that the answer can be improved.
Some of the issues have no perfect solution, which allows for different points of view to be presented by students.