15 January 2011StanChart's Asian currency outlook
Singapore: North East Asian currencies are seen outperforming their South East Asian counterparts this year as China's growth re-accelerates and the government allows for faster appreciation of the yuan.
According to Standard Chartered Bank, more interest-rate increases in China and moves by other North Asian governments to tackle inflation will push their currencies higher.
South East Asian currencies, which rose significantly last year are, however, seen taking a breather.
These currencies were among the best performers in the region last year, after the Japanese yen and the Australian dollar.
The Malaysian ringgit led the tally, with a 12 per cent gain against the US dollar. It was closely followed by the Thai baht, which appreciated 11 per cent, while the Singapore dollar strengthened by 9.5 per cent.
After such a substantial rise in the value of South East Asia's currencies, investor attention is now seen shifting to North Asia.
Callum Henderson, global head of FX Research, Standard Chartered Bank, said: "This year, we think the focus will be on North East Asia, given the re-acceleration in the Chinese economy in the first half of this year, given the inflation problem and given the prospect of more rate hikes coming out of China.
"So we're looking for currencies such as the Chinese yuan and the Korean won to do pretty well."
Standard Chartered expects the yuan to appreciate 6 per cent against the US dollar this year, after rising 3.3 per cent last year.
Meanwhile, the South Korean won, which gained 3.4 per cent last year, is also seen gathering pace this year and is set to rise 8.7 per cent against the US dollar, the UK bank said.
In contrast, the Sing dollar is seen appreciating by a smaller 4 per cent this year and the Thai baht is expected to strengthen 4.5 per cent against the US dollar.
Mr Henderson said: "We certainly think that China will hike interest rates two or three more times in the first half of this year and we're also looking for tightening in the rest of the region as well."
South Korea's central bank on Thursday raised interest rates for the first time this year to 2.75 per cent. And analysts expect another 75 basis points of rate increases in South Korea this year.
http://www.channelnewsasia.com/stories/marketnews/view/1104784/1/.html
