Asia | Emerging Markets | FX
Asia Currencies Insights
- By Caroline Grady
- 12 min read
Summary
• Despite a six-year high on CFETS, we do not expect the PBoC to use the currency as a tool to loosen policy. We remain short USD/CNH.
• Equity weakness is offsetting the benefit from lower oil, and we remain neutral INR.
• Our bearish KRW recommendation has played out, but we see scope for further depreciation despite another rate hike and a resumption of equity inflows.
• TWD’s rangebound performance is set to continue, with strong fundamentals offset by geopolitical risks.
• With ongoing reopening and accelerating core inflation, we are bullish S$NEER.
Asia FX Holding Up Despite USD Strength
We remain constructive on Asia FX despite ongoing dollar strength and an increasingly hawkish Fed. CFETS at a six-year high is insufficient to shift our bullish view on the yuan, and we remain short USD/CNH. Our medium-term constructive view on INR is unchanged, but with the currency remaining rangebound on the competing forces of weaker equities and lower oil, we stay neutral. We also retain a neutral view on TWD. The case for long S$REER has strengthened due to higher-than-expected growth and inflation, with another tightening of policy increasingly likely in April. Meanwhile, on KRW, we hold our short KRW/USD recommendation, with the currency failing to gain ground despite another rate hike.
Summary
• Despite a six-year high on CFETS, we do not expect the PBoC to use the currency as a tool to loosen policy. We remain short USD/CNH.
• Equity weakness is offsetting the benefit from lower oil, and we remain neutral INR.
• Our bearish KRW recommendation has played out, but we see scope for further depreciation despite another rate hike and a resumption of equity inflows.
• TWD’s rangebound performance is set to continue, with strong fundamentals offset by geopolitical risks.
• With ongoing reopening and accelerating core inflation, we are bullish S$NEER.
Asia FX Holding Up Despite USD Strength
We remain constructive on Asia FX despite ongoing dollar strength and an increasingly hawkish Fed. CFETS at a six-year high is insufficient to shift our bullish view on the yuan, and we remain short USD/CNH. Our medium-term constructive view on INR is unchanged, but with the currency remaining rangebound on the competing forces of weaker equities and lower oil, we stay neutral. We also retain a neutral view on TWD. The case for long S$REER has strengthened due to higher-than-expected growth and inflation, with another tightening of policy increasingly likely in April. Meanwhile, on KRW, we hold our short KRW/USD recommendation, with the currency failing to gain ground despite another rate hike.
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