Are the stars aligning for a repeat of last year’s Asia FX rally? Economists at MUFG Bank analyze Asia FX outlook.
Asian currencies unlikely to see a repeat of outsized gains from late last year
We expect Asian currencies to strengthen further in the near term.
The broad-based USD sell-off and correction lower for US yields are helping to ease the downward pressure on Asian currencies that has been in place for most of this year.
Recent political developments in Taiwan which are encouraging investors to scale back geopolitical risks related to the region is further supportive development for Asian currencies as well.
However, the lack of investor enthusiasm over the recent improvement in cyclical momentum in China suggests that it will remain challenging for Asian currencies to extend their rebound.
We do not expect a repeat of the powerful Asian currency rally that took place late last year.
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