Robust growth was maintained in Q1, but China faces the storm of US tariffs
Insight
Within Asia, those currencies with a greater sensitivity to global moves, like the KRW and SGD, have been amongst the bigger beneficiaries in March.
March has seen an overall rise in risk appetite that has benefitted Asian currencies quite significantly. While a more dovish outlook for US interest rates and greater stability in the oil markets have helped create this environment, greater clarity on the RMB has also likely been a key contributor. It seems increasingly clear that the authorities in China are managing the RMB Index in line with the broad USD, with gradual depreciation in the RMB against the CFETS basket still likely to pan out over the next few months.
USD weakness has so far played out more against G10 currencies relative to Asian FX, although the latter has also seen quite a bit of strength. Within Asia, those currencies with a greater sensitivity to global moves, like the KRW and SGD, have been amongst the bigger beneficiaries in March. The MYR has also benefitted from the rebound in oil and some asset sales by a troubled state investment firm. The MYR’s 6.6% appreciation against the USD could though prove fragile given that increased political risk does not yet appear to have been priced in.
Talking Points:
For full analysis, download report: Essential Asia: The RMB Fog Clears (PDF, 3 MB)
© National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.