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The Year of the Tiger Arrives

HONG KONG -- It looks like the Asian currencies are likely to rebound somewhat over the next few weeks, with the dollar's strength tempered by fear of repercussions from

Clinton's

troubles and concern over the impact of the huge Asian bailout operation on the U.S.

That should provide welcome news in this depressed part of the world. As the

Year of the Tiger

arrives, the Asian Tigers are licking their wounds. But watch for more precipitous action in

Indonesia

and

South Korea

, which could hit the rupiah and the won yet again. For Indonesia, there are any number of worst-case scenarios that could spark another panic. The sudden death of

Suharto

, unexpected race riots, mass unemployment. Anything feels possible there.

For Korea, things looks smoother now for a while, but

Kim Dae-jung

takes over the presidency soon, and will face the shortest political honeymoon on record. The won will probably strengthen up to the inauguration and will then become more volatile again. As the

IMF

measures begin to bite, and the markets get the measure of Kim, trouble could return. It will interesting to see how much flexibility Kim will find amongst the Korean people, and particularly the firebrand trade unions.

Still looking solid are the

Chinese

yuan and the

Hong Kong's

dollar peg to the U.S. dollar. The easing of the dollar's rise will relieve some of the presumed pressure there, but it has never looked even half likely that the Chinese authorities, let alone the Hong Kong government, have given serious thought to a devaluation. After all the flat "no devaluation" statements they have issued, the Chinese leadership, and particularly the Premier-in-waiting

Zhu Rongji

, have more to lose in the credibility stakes by doing it than Clinton would in admitting to a quick fling with an intern.

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China looks as if it is firm on taking the high road in this crisis, and moving up the league table as competitors fly downwards. Its overture to

Taiwan

over the past few days -- in which it dropped a requirement that Taiwan recognize the Beijing government as a precondition to talks -- is a dramatic step forward and displays the sort of maturity expected of the major regional player that China has the opportunity to become. As opposed to its petulance in 1996 when it fired unarmed missiles -- flying lampposts -- into the seas around Taiwan.

People argue that with Indonesia and Korea becoming so cheap, they are going to eat up China's exports. I'm not so sure. Devaluation leads to inflation, and hyperinflation is a possibility in Indonesia at least. Companies must be thinking twice about signing agreements to buy goods from Indonesian firms, despite the huge discounts on offer.

Same with foreign investment. The stability issue is crucial in determining investment flows, and this is a God-given opportunity for China to demonstrate that it is reliable. The biggest recipients of foreign investment in the world include China, the U.S. and

France

. People don't choose the last two because of cheap labor. So, the argument goes, even if China's costs rise relative to other places in Asia, is that going to make

Siemens

say: "Forget China, go into Korea"? Seems unlikely.

The yen's direction, and indeed that of

Japan

, is harder to read. It depends on how forcefully

Prime Minister Hashimoto

can push through the much-needed reforms to the financial system, and how quickly he can inject some life into the moribund Japanese economy. If he can do it, and the markets appear to be cautiously optimistic on the issue at this point, then it will help boost confidence in an Asian resurrection.

There is a sense growing that Japan is beginning to get the message -- that fundamental structural changes are necessary. The scandal pounding the

Ministry of Finance

will be useful in cutting the Japanese bureaucrats down to size, but turning the antiquated banking system round will not be an easy process.

So where will Asia be in a year's time? Polish up the crystal ball: the role of Greater China, including Taiwan and Hong Kong, much enhanced. Probably Japan's too. Impossible to say where Indonesia and Korea will be. Thailand nearly as bad. A revived political role for the military in any or all three is a possibility. The

Philippines

and

Malaysia

would appear to have a better chance of staging a recovery -- they are smaller, more organized and under control.

Anton Graham, our Hong Kong-based correspondent, provides commentary weekly for TheStreet.com. His column appears every Wednesday -- and on many other days during these difficult Asian times. He most definitely welcomes your

feedback.