Currencies in emerging-market economies could gain 5 to 10 percent against major peers this year as global capital inflows will likely more than offset intervention by their central banks, an HSBC investment executive said yesterday.
“Emerging-market currencies will continue to appreciate, driven chiefly by the Chinese yuan, although their central banks will take steps to slow the pace,” Arjuna Mahendran, head of Asia Investment Strategy, told a media briefing in Taipei.
HSBC expects the yuan to pick up 3 percent this year while China’s economy expands 8.9 percent.
China’s fast-growing economy will attract more funds to the region, boosting the currency’s weight internationally, the investment strategist said.
Last year, China allowed yuan deposits in Hong Kong in a bid to promote the currency as an alternative to the greenback.
“Despite its growing popularity, it will take 10 to 20 years before the Chinese yuan can challenge the US dollar as a reserve currency,” Mahendran said.
Mahendran expects Taiwan’s export-focused economy to grow 4.7 percent this year, putting extra pressure on the currency.
The region’s central banks will adopt measures to slow the pace of appreciation to support exports, but they will not reverse the trend, Mahendran said.
“The uptrend will help absorb inflationary pressure, which will become a big theme in the next few years,” he said.
Mahendran expects the macroeconomic backdrop to push up energy costs this year with crude oil trading between US$85 and US$95 a barrel. Precious metals and agricultural commodities will outperform this year, while base metals will bode well selectively, he said. The rising cost of natural cotton fibers will likely benefit Taiwanese producers of synthetic fibers due to its lower cost.
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