Merrill Lynch & Co, the biggest US securities firm, recommends investors buy and hold the currencies of Thailand, South Korea and Taiwan on reduced expectations for rising borrowing costs in the US and China.
Quickening growth in the three Asian economies will also help raise their currencies as crude-oil prices recede from record-high levels, Vincent Low, Merrill's head foreign-exchange strategist for emerging Asia, wrote in a report.
"They will stand to benefit most from the improving environment" because of their "stronger econo-mies," Low said.
Bank of Korea Governor Park Seung last week said that his country's economy will likely improve in the second half.
Thai Prime Minister Thaksin Shinawatra said his country's second-quarter economic growth will exceed the previous three months.
Last month, the government raised its growth forecast for this year to 5.41 percent from 4.7 percent after record exports helped the economy expand at its fastest pace in three and a half years in the first quarter.
Expectations that China's government will engineer a gradual economic slowdown, reducing con-cerns that a sudden drop in growth would lead to declining demand for Asian exports, may help strengthen the three currencies, Low wrote.
China's National Bureau of Statistics on Wednesday said in a report that prices are under control and the country is capable of avoiding "severe" inflation.
China's central bank won't consider raising rates until it studies inflation reports for this month, next month and August, the China Securities Journal, a paper affiliated with the official Xinhua news agency, reported on Wednesday.
"Absent of a big inflation surprise, China's policy makers will likely wait a few months and examine data releases before deciding to pull on the interest-rate trigger," Low said. "Fears of a hard landing in China have receded. The storm clouds over Asian currencies appear to be slowing lifting."
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