Asian Currencies Rallying at Peak, Sell Them Before It’s Late: Goldman
Currencies in Asia are seeing their best rally in more than 7 years, but further easing in China & Japan could push yuan & yen to their weakest since 2008 Goldman predicts a 14% plunge in yen in next one year and a 7.4% drop in yuan
It’s time to sell Asian currencies after their best monthly rally in more than seven years, according to Goldman Sachs.
The currencies will resume declines as further easing in China and Japan is likely to push the yuan and yen to their weakest levels since at least 2008, says Kamakshya Trivedi, a strategist at the bank who correctly predicted in November that emerging markets would recover in 2016. South Korea’s won led the March rally with an 8.2% advance and Malaysia’s ringgit’s 7.8% jump was its biggest since 1998. A gauge of 10 Asian currencies excluding the yen rose 3%.
“These are good levels to short Asian currencies, especially the won, baht, Taiwan dollar, yuan and ringgit,” said Trivedi, Goldman’s chief emerging-market macro strategist in London. “There are very direct implications for
emerging-market currencies in Asia from yuan moves. We forecast more weakness across this currency complex.”
Developing-nation exchange rates completed their strongest month since at least1999 as commodities rebounded and the dollar slumped. Goldman predicts a 14% plunge in the yen to 130 per dollar in the next12 months, a level last seen in 2002, and a 7.4% drop in the yuan to 7 versus the greenback, which would be the weakest since May 2008. The won will decline almost 12% from current levels to 1,300 in the period.—Bloomberg