Asian Currencies Could Be On The ‘Backfoot’ Despite Likely U.S. Rate Cuts This Year, JPMorgan Says

Forex

Economic

Summary:

The U.S. dollar is expected to remain resilient despite possible Fed rate cuts this year.

Asian currencies could be on the “backfoot” this year despite signals that the U.S. Federal Reserve could cut interest rates soon, according to Julia Wang, executive director and global market strategist at JPMorgan Private Bank.

Emerging market currencies often stand to gain when the Fed cuts interest rates and the U.S. dollar weakens.

But Wang said this might not be the case in 2024 as the U.S. dollar is expected to benefit from forecasts shifting to a soft landing for the U.S. economy rather than a recession.

“The dollar probably could remain somewhat resilient,” Wang told CNBC’s Squawk Box Asia on Wednesday.

It will be the U.S. presidential elections and uncertainty in the China economy may continue supporting the U.S. dollar at the end of this year, said Saktiandi Supaat, head of FX strategy at Maybank.

“The Asian currencies are not appreciating, it’s actually the dollar is positively correlated with the performance of [the] U.S. equity market because it’s a soft landing narrative, rather than a recession narrative around those rate cut bets,” Wang said.

However, Supaat, pointed out that Asian currencies did rally last year when there where expectations that the Fed was going to cut rates.

Admitting that this is a “slightly more contrarian view,” Wang said that Asian currencies could stay on the “backfoot” and domestic demand in the region could be weaker than typical easing cycles.

Several analysts have said that Asian currencies such as the Chinese yuan and Indian rupee could strengthen from U.S. interest rate cuts later this year, with the Korean won likely to be one of the major beneficiaries.

Simon Harvey, head of FX analysis at Monex, predicted that the won could gain anywhere between 5% and 10% if the U.S. easing cycle is deep, but as little as 3% if the cycle is shallow.

Although many economists expect the first Fed rate cut to happen in June, JPMorgan projected that it may be “pushed back” but there could still be three rate cuts in 2024.

Inflation in the U.S. increased yet again in February, with the consumer price index rising by 0.4% for the month and 3.2% from a year earlier.

“Inflation is somewhat sticky at a 2.5-3% range. It should give investors more reasons to be cautious in terms of asking for too much by way of rate cuts,” Wang said, adding that the bank’s investments are still toward sectors that will benefit from global as well as U.S. growth and the global manufacturing sector.

Source：CNBC

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Risk Disclosure

The risk of loss in trading financial instruments such as stocks, FX, commodities, futures, bonds, ETFs and crypto can be substantial. You may sustain a total loss of the funds that you deposit with your broker. Therefore, you should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

No decision to invest should be made without thoroughly conducting due diligence by yourself or consulting with your financial advisors. Our web content might not suit you since we don't know your financial conditions and investment needs. Our financial information might have latency or contain inaccuracy, so you should be fully responsible for any of your trading and investment decisions. The company will not be responsible for your capital loss.

Without getting permission from the website, you are not allowed to copy the website's graphics, texts, or trademarks. Intellectual property rights in the content or data incorporated into this website belong to its providers and exchange merchants.

Recent Searches

Top Searches

Markets

Analysis

User

24/7

Economic Calendar

Education

Data

Asian Currencies Could Be On The ‘Backfoot’ Despite Likely U.S. Rate Cuts This Year, JPMorgan Says

Source：CNBC

Risk Disclosure