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June 29, 2017

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Asian currencies expected to rise 4-5 percent in '14: DBS

TAIPEI, Taiwan -- Against the weakening momentum of the greenback, Asian currencies led by Singaporean dollars and South Korean won are expected to appreciate by 4-5 percent, DBS said.

Tommy Ong (王良享), executive director of Treasury & Markets at DBS Bank Hong Kong, recently said in a foreign currency investment outlook that he believes investors have cleared most of their long position contracts of U.S. dollars, signifying that the uptrend of the U.S. dollar is nearing an end.

The market expectation that the U.S. Federal Reserve's (FED) tapering-off of a massive bond-buying program would continuously push up the green back is turning rusty, Ong said.

Ong gave an upbeat outlook on this year's performance for most Asian currencies other than the Indonesian rupiah and the Indian rupee, predicting that Asian currencies would average 4-5 percent of appreciation.

The Federal Reserve's gradual exit from stimulus spending has not had an impact on most of Asia, but India is an exception, DBS said recently.

DBS said outflows from Asia were less than what the region experienced in August 2011 when the European Union's debt crisis erupted in earnest, and they were also less than the outflows that took place when Lehman Brothers collapsed in September 2008.

Asian currencies have fallen by less than 1 percent against the dollar over the past month, compared with the declines ranging from 6-30 percent in other emerging market currencies, DBS said.

Tommy Ong also anticipated the uptrend of the New Zealand dollar. Ong indicated that New Zealand's economic growth is on the fast track, posting a six-year high of 3.5 percent for the third quarter of 2013.

Facing the looming pressure of interest rate hikes caused by surging housing prices, Ong expects that the New Zealand dollar will test US$0.86 against the U.S. dollar this year.

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