LONDON: A growing number of global investors are eyeing Asia for emerging currency bargains, with undervalued currencies like the South Korean won, Indonesian rupiah, and Indian rupee drawing renewed interest.
The shift comes as a Bloomberg index of Asian currencies marked its strongest gain in nearly a week, buoyed by a rally in the Taiwanese dollar and growing optimism over US-Asia trade talks.
“The region has been fundamentally cheap for a long time,” said Claudia Calich, head of emerging market debt at M&G Investment Management. She added that although investors had previously favoured Latin America due to higher carry returns, interest in Asia is picking up as valuations become harder to ignore.
Currency strategists from Goldman Sachs and Barclays are now bullish on the won, as well as the Malaysian ringgit, South African rand, and Singapore and Taiwanese dollars. Goldman’s analysis factored in valuation metrics, dollar asset conversion potential, and the yuan’s stabilising role.
Market sentiment has shifted as signs emerge that trade tensions — particularly those sparked by Trump’s tariff threats — may have peaked. US-China talks have reportedly made “substantial progress,” lifting the yuan and boosting regional currencies.
The improved outlook has also led global funds to increase purchases of local currency bonds in Indonesia, Thailand, and South Korea. Meanwhile, sustained selling pressure on the US dollar prompted intervention by Hong Kong’s monetary authority to protect its currency peg.
However, analysts remain cautious. While a catch-up rally is underway, the longevity of gains is uncertain. Beijing’s control over the yuan could temper broader regional rallies, even as it offers stability.
The US dollar regained some ground last week after Federal Reserve chair Jerome Powell signalled a pause on rate changes, resulting in some Asian currencies paring their earlier advances.
“We’re not quite in a global growth cycle that supports strong outperformance by Asian currencies,” said Grant Webster, co-head of EM sovereign debt at Ninety One. Still, he acknowledged that cracks in the dollar’s dominance have created room for volatility — and opportunity.
Dominic Schnider of UBS Wealth Management added, “When scouting for potential winners, the focus is on those that haven’t rallied yet. From a valuation perspective, many Asian currencies still look cheap.”
Key data to watch this week:
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Trade data from India and Indonesia to gauge tariff impact
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GDP figures from Malaysia and Poland
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Mexico’s central bank decision on policy rates
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Inflation data across India, Argentina, Bulgaria, and Poland
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US President Trump’s Middle East visit
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Xi Jinping and Brazil’s Lula to meet at the China-CELAC summit
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Ceasefire developments between India and Pakistan
–BLOOMBERG
