Asia Currencies Miss USD Weakness Leg-Up – ING
(19 January 2024 – Asia) Asian currencies failed to take advantage of US Dollar weakness in Q4 2023.
The consensus view in 2024 is that the dollar will decline. As outlined in ING’s 2024 FX Outlook, the bank forecasts a broader dollar trend to become more apparent through Q2 2024 as lower US rates unleash portfolio flows more broadly to global markets.
Since December, the USD/CNY has been at the mid-point of performance for Asia Pacific (APAC) currencies and is roughly unchanged after trading in a range between 7.10 and 7.20.
The Singapore dollar has reacted to mixed data reports, with core inflation still elevated at 3.2 percent but industrial production and non-oil domestic exports remaining in expansion. China’s ongoing economic challenges and the strength of the CNY in Singapore’s trade basket infer that this is the main source of downside risk.
The Japanese yen could well be an outperformer if, as ING’s economics team predicts, the Bank of Japan does significantly shift policy in early Q2 2024.
“The main reason for Asian currency weakness is disappointing Chinese economic growth and a suppressed Chinese Yuan (CNY) as policy makers scramble to reflate the economy” commented ING APAC Regional Head of Research, Robert Carnell.
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