The analysis team at Nomura explains that since the start of the year, the softer broad USD due to the Trump administration’s comments on FX, and a pushing out of US fiscal stimulus expectations, and improving global growth have supported Asia FX performance.
“We believe these factors are somewhat priced in and broad long USD/Asia positioning has been significantly reduced. As such, we revise our Asia FX forecast to capture these recent developments but still pencil in local currency depreciation through 2017. Specifically, we see Northeast Asia FX (and SGD) underperforming due to the major impact from geopolitical risks, a rise in China’s credit and growth concerns, the threat of US protectionism and our expectation of gradual moderation in trade growth in H2 2017. In Southeast Asia, we think India, Philippines, Indonesia and Thailand could benefit from positive local dynamics.”