Greg Gibbs, analyst at Amplifying Global FX Capital, points out that the CNY is the strongest currency among the highly industrialised Asian currencies in the last six months, which probably reflects trade talks with the US and Chinese efforts to assuage US concerns that it might weaken its currency to regain lost trade advantage due to tariffs.
Key Quotes
“Chinese policymakers have probably preferred a relatively stable currency to help reduce the risk that its weak stock market last year might fuel capital outflow and further tighten domestic credit conditions.”
“The rebound in Chinese equities this year, reflecting broad policy stimulus measures, including efforts to ease credit tightening and fiscal measures, may have helped boost the CNY. Reports that the US and China are close to a trade deal, which includes an agreement of exchange rate policy, has probably further supported the CNY in the last month.”
“The next strongest currencies after the CNY are the SGD and INR. As discussed above, India’s PMIs have bucked the weakening trend in the region, and this may help account for relative strength in the INR.”
“The KRW and TWD have been relatively stable, towards the softer end of their range over recent months, lagging behind gains in other region’s EM currencies. This is consistent with weaker trends in Korean and Taiwan PMIs.”
“ASEAN currencies are stronger over three months, although they have lost ground in recent weeks. The weaker ASEAN PMI may be damaging sentiment for these currencies.”
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