20 Mar 2015
Post-FOMC thoughts on Asia FX – Nomura
FXStreet (Barcelona) - Expecting the dovish FOMC to drive the Asia FX near-term, the Research Team at Nomura, give the outlook for the Asian currencies for the coming months.
Key Quotes
“The dovish surprises from the FOMC may remain the primary focus and driver of Asia FX appreciation in the near term. However, we believe this could be short-lived as the market is likely to focus back on the first Fed rate hike which is expected within the next six months.”
“Beyond US Fed policy normalisation, which should provide some support for the broad USD over the medium term (especially given the policy divergences between the ECB and BOJ), we see additional drivers for Asia FX in the coming months that should create significant performance divergences in the region."
“These include: 1) Still relatively subdued global commodity prices and the positive impact on broad Asia’s terms of trade, inflation, and growth (we expect net commodity-exporter countries including Malaysia and Indonesia to continue to suffer);
2) risks of local monetary easing. Following the surprise moves over the past two months by the Monetary Authority of Singapore (MAS) reducing its FX appreciation slope, to central banks cutting rates including twice by the Reserve Bank of India (RBI) and once each by the Bank of Korea (BoK), Bank of Thailand (BoT), and Bank Indonesia (BI), we see risks of central banks easing further. The next focus is the MAS meeting (expected before 14 April), where we see a risk of another FX policy adjustment;
3) The FX policy stance of the Chinese authorities and our view that a shift to a deliberate RMB depreciation is unlikely; and
4) Local idiosyncratic factors such as temporary repatriation flows into Malaysia and out of Indonesia.”
“Our shorts in Asia FX are SGD, MYR and IDR”
“Our longs in Asia FX are CNH, INR, PHP, and KRW”
Key Quotes
“The dovish surprises from the FOMC may remain the primary focus and driver of Asia FX appreciation in the near term. However, we believe this could be short-lived as the market is likely to focus back on the first Fed rate hike which is expected within the next six months.”
“Beyond US Fed policy normalisation, which should provide some support for the broad USD over the medium term (especially given the policy divergences between the ECB and BOJ), we see additional drivers for Asia FX in the coming months that should create significant performance divergences in the region."
“These include: 1) Still relatively subdued global commodity prices and the positive impact on broad Asia’s terms of trade, inflation, and growth (we expect net commodity-exporter countries including Malaysia and Indonesia to continue to suffer);
2) risks of local monetary easing. Following the surprise moves over the past two months by the Monetary Authority of Singapore (MAS) reducing its FX appreciation slope, to central banks cutting rates including twice by the Reserve Bank of India (RBI) and once each by the Bank of Korea (BoK), Bank of Thailand (BoT), and Bank Indonesia (BI), we see risks of central banks easing further. The next focus is the MAS meeting (expected before 14 April), where we see a risk of another FX policy adjustment;
3) The FX policy stance of the Chinese authorities and our view that a shift to a deliberate RMB depreciation is unlikely; and
4) Local idiosyncratic factors such as temporary repatriation flows into Malaysia and out of Indonesia.”
“Our shorts in Asia FX are SGD, MYR and IDR”
“Our longs in Asia FX are CNH, INR, PHP, and KRW”