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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
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