Asian currencies, including the New Taiwan dollar, are likely to rise against the US dollar this year as global monetary easing could drive idle funds to the region as investors look to take advantage of its relatively strong economic growth, DBS Bank foreign exchange analyst Tommy Ong (王良亨) said yesterday.
“More hot money may flow into emerging Asia this year propelled by monetary easing in the US, Europe and Japan,” the Hong Kong-based currency analyst told a media briefing in Taipei.
The trend might push up currencies in the region, with some growing faster than others, Ong said.
Ong’s observations were consistent with central bank Governor Perng Fai-nan (彭淮南), who said earlier this month that capital is flowing into Taiwan and the monetary authority is keeping a close eye on its movement.
On Feb. 8, Perng said that Taiwan was not alone, as Thailand, India, South Korea and the Philippines were also seeing inflows of foreign funds following the US Federal Reserve’s announcement that it intends to extend ultra-low interest rates through 2014 to stimulate the US economy and job market.
“The markets and currencies in those countries all point upward despite their different economic fundamentals,” Perng said at the time. “Hot money has powered the pickup.”
As of yesterday, the NT dollar has strengthened 2.67 percent this year to trade at NT$29.568 versus the greenback, while the TAIEX has advanced 12.01 percent to 7,921.50 points, official statistics showed.
Ong said major Asian currencies, with the exception of the yen, could climb higher since some have not yet recovered to pre-2008 levels, when the global financial crisis hit.
Indonesia’s currency is likely to outperform its Asian peers, with a 10 percent gain this year thanks to healthy domestic demand making its GDP less susceptible to the global economic slowdown, Ong said.
The yuan might advance 3 percent annually for the next three years as the world’s most populous country gains increasing importance in global trade and foreign currency exchange, Ong said.
“The correction in offshore yuan trading in the second half of last year was a short-term response to credit tightening and it will reverse going forward,” he said.
The NT dollar might remain relatively stable, he said, adding that Taipei’s monetary policymakers have shown a distaste for drastic movements in the local currency and have intervened on the foreign exchange market to curb volatility.
Ong was also positive about the Australian dollar on the back of solid demand for the nation’s energy and mineral deposits, including iron ore.