Asian currencies generally fare poorly in a weak growth environment, hence its strong correlation to oil prices. Analysts at ANZ Bank expect low oil prices to coincide with further downward pressure on the region’s currencies.
Key quotes
“Inflation in the Asian region will head lower, and into disinflation for some. This will not raise deflationary fears, as we believe the move into negative inflation to be temporary.”
“The low inflation environment we are in will provide policy space for Asian central banks to ease monetary policy further to help support growth.”
“The ability to keep interest rates lower for longer will help as fiscal positions in the region deteriorate. We expect Asian currencies to remain under pressure.”
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