The US dollar is on a strong rise, causing Asian emerging markets to deploy foreign exchange defense measures.

With the looming threat of tariffs from the Trump administration, policymakers in emerging markets in Asia are delving deep into their toolboxes to resist the sustained strength of the US dollar. After multiple interventions in the market to curb the depreciation of the Indonesian rupiah, Indonesia is now requiring commodity companies to repatriate all overseas earnings. South Korea is issuing special bonds to supplement its foreign exchange stability fund for the first time in 21 years. The US dollar is at historic highs, US treasury bond yields are soaring, and US trade policies could potentially lead to financial market turmoil, leaving officials in developing countries in a bind. They cannot solve the problem of economic growth slowdown by adjusting interest rates, as they fear it could lead to a currency collapse, and massive interventions in the foreign exchange market could deplete reserves. Emerging market currencies are nearing historic lows. Stefanie Holtze-Jen, Chief Investment Officer for Asia Pacific at Deutsche Bank, said, "This is a very delicate balancing act. Officials do not want the currency to come under pressure, as it would face potential capital outflow risks." At the beginning of this year, countries like India and Indonesia had ample foreign exchange reserves. Authorities usually try to resist sharp market fluctuations rather than aiming to control the exchange rate at a specific level. Interventions - whether through spot markets or derivatives - are usually the first line of defense. However, these measures come at a high cost: India's foreign exchange reserves have fallen by $80 billion from a record high of $705 billion at the end of September last year. The Reserve Bank of India appears to be easing control over the rupee. Although there is currently no sign that authorities are running out of firepower, the risks remain significant. Crises in places like Sri Lanka and Argentina in the past are still fresh in memory. Nevertheless, emerging markets are becoming more creative. Last year, Malaysia tried to boost its currency from a 26-year low by encouraging state-owned enterprises to repatriate overseas investment earnings. Indonesian central bank notes aim to stabilize the Indonesian rupiah by attracting foreign funds through generous returns. Sonal Varma, economist at Nomura Holdings, said earlier this month, "Asia can use a mix of tools, such as requiring exporters to convert overseas earnings into local currency, restricting gold imports, or setting up swap facilities. One-size-fits-all approach does not work in all situations."