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Currencies Economics – Markets – Strategy This page is intentionally left blank 22
Economics – Markets – Strategy Currencies FX: Slipping on oil & USD Asia: Much has changed during the second quarter Oil/inflation risks have overtaken global imbalances as a key international concern, leading the US and G7 nations to seek a stable USD Despite their resilience during the US subprime crisis, Asian currencies are not faring as well against high oil prices We have downgraded our outlook for Asia’s currencies and postponed the next phase of regional FX appreciation to 2H09 CNY: HKD: TWD: KRW: SGD: MYR: THB: IDR: PHP: INR: The pace of appreciation will decelerate as overheating risks fade and oil/inflation risks displace global imbalances atop the G7 agenda Moving back to the upper half of the 7.75-7.85 band Our favorite currency. Improving cross-straits relations put economics back in focus As weak as its international liquidity position A higher USD/SGD is not inconsistent with an appreciating SGD NEER policy, especially during a US rate hike cycle Fundamentally strong but weighed down by politics Tracking Asian currencies lower, not helped by export growth falling below import growth Scope to weaken beyond 9500 when US rate hike cycle starts Typically gives back 45% of earlier gains when fundamentals turn south Consolidation normally follows correction, unless the stock market enters into a freefall VND: Full-year depreciation in 2008 is likely to be 5%-10%, not the 20%- 40% expected by the market USD: EUR: Supported by rate hike expectations and policymakers signaling a desire for a ‘strong dollar’ Downside risks from narrowing EU-US rate differentials JPY: From an unwinding of JPY carry trades, to USD recovery, to broad consolidation Philip Wee • (65) 6878 4033 • philipwee@dbs.com CURRENCIES 23
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Economics - Markets - Strategy 3Q 2
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Economics Markets Strategy - the DBS Vickers Securities Equities ...

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