18 Dec 2014
Policy and growth divergence to define the Asian FX scene in 2015 – ANZ
FXStreet (Barcelona) - FX Strategists at ANZ share their outlook for the Asian FX space, noting that policy and growth divergence between Asia and US will drive the Asian FX market in 2015.
Key Quotes
“Policy and growth divergence between the US and Asia will be the defining themes for Asian currencies in 2015. The US Federal Reserve will be hiking interest rates next year, while some Asian central banks will be acting in the opposite direction. Growth momentum is firmly in favour of the US, while structural and cyclical slowdowns in certain parts of Asia will see growth differentials narrow.”
“The benefits of lower oil prices in the Asian region could be offset by the negative impact of financial market volatility on the real economy. There will be country specific factors at play, but domestic considerations will take a back seat to the broader USD strength story in 2015.”
“We are forecasting a 3% depreciation in Asian currencies over 2015, a similar decline to that seen in 2014. Our forecasts are more bearish than the consensus, though we expect the market to start shifting towards our view soon. The risks are tilted towards a larger depreciation should tighter US monetary policy lead to larger portfolio outflows from the region.”
“CNY and MYR are the only two Asian currencies expected to appreciate against the USD, but for different reasons. For CNY, we expect the authorities to maintain a stable to modestly appreciating fix, with the trade surplus and increased investor interest in onshore Chinese assets leading to a stronger yuan. The December selloff in MYR on the back of the slump in oil prices looks overdone to us, and we expect the ringgit to correct slightly from its oversold levels.”
“KRW is forecast to be the worst performing currency with a 7% decline. Expect Korean policymakers to be active in 2015.”
Key Quotes
“Policy and growth divergence between the US and Asia will be the defining themes for Asian currencies in 2015. The US Federal Reserve will be hiking interest rates next year, while some Asian central banks will be acting in the opposite direction. Growth momentum is firmly in favour of the US, while structural and cyclical slowdowns in certain parts of Asia will see growth differentials narrow.”
“The benefits of lower oil prices in the Asian region could be offset by the negative impact of financial market volatility on the real economy. There will be country specific factors at play, but domestic considerations will take a back seat to the broader USD strength story in 2015.”
“We are forecasting a 3% depreciation in Asian currencies over 2015, a similar decline to that seen in 2014. Our forecasts are more bearish than the consensus, though we expect the market to start shifting towards our view soon. The risks are tilted towards a larger depreciation should tighter US monetary policy lead to larger portfolio outflows from the region.”
“CNY and MYR are the only two Asian currencies expected to appreciate against the USD, but for different reasons. For CNY, we expect the authorities to maintain a stable to modestly appreciating fix, with the trade surplus and increased investor interest in onshore Chinese assets leading to a stronger yuan. The December selloff in MYR on the back of the slump in oil prices looks overdone to us, and we expect the ringgit to correct slightly from its oversold levels.”
“KRW is forecast to be the worst performing currency with a 7% decline. Expect Korean policymakers to be active in 2015.”