Essential Asia: Positioned to walk the (policy) tight rope

Most Asian currencies ended the first half of 2017 stronger vs the USD, this strength has led to the unintended consequences of tighter monetary conditions and worsening terms of trade.

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We expect Asian central banks to start reducing policy accommodativeness in the second half of 2017, or signal the intention, at the very least. In fact, monetary conditions may have started to tighten in some Asian economies, an unintended consequence of currency strength

Talking Points

  • Most Asian currencies ended the first half of 2017 stronger vs the USD. Asian currency strength has led to the unintended consequences of tighter monetary conditions and worsening terms of trade.
  • Market players see the recent CNY movements and intervention as signs that the authorities are no longer against CNY appreciation.
  • The scope for USD/CNY to climb higher for the rest of 2017 is supported by the slower macro outlook, but admittedly the ongoing soft global USD trend may be a drag to the extent and momentum.

For full analysis, please download report: Essential Asia: Positioned to walk the (policy) tight rope (PDF, 659KB)