Reversal of weak dollar may test Asia’s resilience to tariffs, IMF says

By Leika Kihara

(Reuters) -Asia may see its resilience to U.S. tariffs challenged if a rally in the dollar and a rebound in low interest rates lead to tighter financial conditions, a senior International Monetary Fund official told Reuters.

If the U.S. Federal Reserve continues to cut interest rates, a subsequent dollar decline could allow Asian central banks to loosen monetary policy and support their economies without worrying about the risk of capital outflows, said Krishna Srinivasan, director of the IMF’s Asia and Pacific Department.

Low interest rates and declining long-term yields have also helped Asian governments and companies borrow cheaply and weather the hit from higher U.S. tariffs, he said.

But Srinivasan warned such favourable financial conditions could change.

“If inte