The United States government is now less than two weeks from a deadline that could trigger a default on its debt. While this is causing alarm among some in the United States, Asia, so far, appears to be reacting calmly.
Will default happen?
Most analysts consider it unlikely the U.S. government will default on its debt. And there is little evidence yet of major anxiety among Asia's central bankers, major market players and other key investors from the region.
China is the United States' largest creditor, holding more than $1 trillion of America's debt, followed by Japan, which has a stockpile of about $900 billion.
U.S. lawmakers and the Obama administration are in contentious negotiations over authorizing additional government borrowing before a $14.3 trillion debt limit is reached on August 2.
David Cohen, director of Asian forecasting at Action Economics, an online consulting company in Singapore, says investors in Asia, like the rest of the world, are nervous about the U.S. debt standoff.
"I think there's a recognition that a default by the United States could potentially trigger a global financial crisis that could derail the global economic recovery. But, at the same time, just as we've seen in the pricing in the markets, people still expect that the Congress and the president will come up with some kind of deal before the deadline so that it doesn't trigger a default by the United States," said Cohen.
Tim Condon, the chief economist in Asia for ING Bank, agrees a default could, at worst, induce market panic. But he says that outcome is unlikely.
"I think that is the consensus view that this is political theatre and... it's not a Greek situation where the government simply cannot afford to pay its obligations," he said. "When you look at the yield on 10-year treasury notes, it certainly does not register any anxiety about ability to pay."
Analysts say any default due to the debt ceiling not being raised next month would generally be interpreted as a technical and temporary effect.
They say what is more worrisome is a downgrade by ratings agencies of America's credit worthiness.
Beijing has called on Washington to earnestly adopt reasonable policy measures to protect the interests of investors. But analysts say China and Japan have no other significant options for their currency reserves and central banks are not traditionally price sensitive investors.
Last month, Japanese Finance Minister Yoshihiko Noda characterized U.S. Treasuries as attractive investment products.
Other large economies in Asia have significant currency reserves in U.S. dollars. For India, it is more than half of its foreign currency assets. And South Korea has invested nearly two-thirds of its $300 billion worth of reserves in U.S. dollar assets.
At the end of Friday trading, Japan's benchmark Nikkei index climbed to a two-week high. Some traders expressed concern about the yen's renewed strength against the U.S. dollar. They attribute the Japanese currency's rise to uncertainly about the U.S. debt default scenario.