USD/Asia: Further upside on the way - Westpac

In view of Frances Cheung, Research Analyst at Westpac, a few coinciding, unfavourable developments may point to further  upside to USD/Asia and the first among them is that several notable features about the USD’s recent rise suggest it will prove sticky and likely run yet further.

Key Quotes

“Second, there have been a few big earnings misses from tech companies leading to equities outflows from Asian markets. Third, Trump’s focus on the tech sector on the trade front is starting to hurt some corporates and may have wider ramifications, which in turn could lead to more equity outflows from Asia and trigger investors to reassess the downside risk to growth in the region.”

“History tells us that Asian currencies performance has been pretty much constrained by the broad dollar move in the medium term, when domestic factors were not dominating. Current account deficit currencies – IDR and INR – will be harder hit given capital flows are particularly important for them. The INR, clouded by domestic factors including the fiscal outlook and weak domestic demand for LCY bonds, is unlikely to stage a recovery soon.”