That chain of events back in 1994 eventually touched off a round of competitive currency devaluations that helped trigger the Asian financial crisis, featuring bank and corporate failures and recessions across much of the region.
Is the current market turmoil foreshadowing yet another region-wide bust? There are certainly parallels, but important differences as well. This time around, Asian economies have stronger current account balances, fiscal positions and foreign exchange reserves that provide a thicker buffer against turbulence.
Risks are building nonetheless as China's surprise yuan policy U-turn on August 11 sends ripples across the globe from Vietnam to Kazakhstan and threatens vulnerableemerging market economies from Brazil to Turkey. The global sell-off deepened on Monday, with US index futures signalling more losses.
China's yuan devaluation comes on top of a steep slowdown in the world's second-biggest economy and Asia's biggest (Japan was No 1 back in 1994) and a commodities slump that is hurting nations from Brazil to Australia, Malaysia and South Africa. Chinese companies now threaten to displace exports from Asian and emerging market competitors just as the US Federal Reserve prepares to raise interest rates for the first time since the global financial crisis.
"A nasty storm is probable, not just possible" in countries like Brazil and South Africa, said Stephen Jen, co-founder of London-based hedge fund SLJ Macro Partners LLP. "But I do not anticipate a crisis or even very tense moments in Asia. The main reason is that the Asian Crisis of 1997 already cleansed Asia's financial system and Asia's resilience ought to be higher."
Before 1994, Asia was the darling of the investment world and viewed by some as a late-20th century growth miracle. That euphoria didn't last long.