Updated Saturday, April 17, 2010 12:46 am
Goldman says Asian currency trades 'more risky,' rely on yuan
Goldman says Asian currency trades 'more risky,' rely on yuan
Buying Asian currencies is a “more risky” investment after they strengthened above or close to levels seen before the global financial crisis, according to Goldman Sachs Group Inc.
Indonesia's rupiah and Malaysia's ringgit have appreciated past pre-2008 crisis levels on an inflation-adjusted, trade- weighted basis by 2 percent and 1 percent respectively, Michael Buchanan, chief Asia-Pacific economist at Goldman Sachs in Hong Kong, wrote in a note Thursday. South Korea's won is 21 percent below its pre-crisis level, the Thai baht 11 percent, the Taiwan dollar 8 percent and the Chinese yuan 7 percent.
Investors who borrowed U.S. dollars to buy the rupiah would have made a return of 27 percent in the past year, while a similar won trade would have earned 20 percent, according to data compiled by Bloomberg. Singapore this week revalued its currency and plans to seek more gains to curb inflation, adding to speculation that China would end a 21-month-old yuan peg.
Rising inflation, trade surpluses and portfolio inflows, as well as asset-price bubbles may spur central banks to seek appreciation beyond pre-crisis levels, the note said, adding that monitoring each currency's trade-weighted index is crucial to determining central banks' appetite for further gains.
Policy makers in Australia, Malaysia, India and Vietnam have raised interest rates in recent months. China has twice increased banks reserves requirements as the economy grew in the first quarter at its fastest pace in almost three years.
China may allow the yuan to appreciate by June 30 to curb inflation, while avoiding a one-time jump in value that might endanger export jobs, a Bloomberg survey of analysts showed.
Among Asian currencies, the Taiwan dollar “ticks the most boxes,” he wrote. “It has room to go before it returns to the pre-crisis level, it is managed and so less subject to swings in risk appetite, and benefits from prospects for a gradual appreciation of the Chinese yuan,” he wrote.
The won, rupee, rupiah, peso, ringgit, and Singapore dollar may also continue to appreciate, according to Buchanan.
Goldman says Asian currency trades 'more risky,' rely on yuan
Goldman says Asian currency trades 'more risky,' rely on yuan
Buying Asian currencies is a “more risky” investment after they strengthened above or close to levels seen before the global financial crisis, according to Goldman Sachs Group Inc.
Indonesia's rupiah and Malaysia's ringgit have appreciated past pre-2008 crisis levels on an inflation-adjusted, trade- weighted basis by 2 percent and 1 percent respectively, Michael Buchanan, chief Asia-Pacific economist at Goldman Sachs in Hong Kong, wrote in a note Thursday. South Korea's won is 21 percent below its pre-crisis level, the Thai baht 11 percent, the Taiwan dollar 8 percent and the Chinese yuan 7 percent.
Investors who borrowed U.S. dollars to buy the rupiah would have made a return of 27 percent in the past year, while a similar won trade would have earned 20 percent, according to data compiled by Bloomberg. Singapore this week revalued its currency and plans to seek more gains to curb inflation, adding to speculation that China would end a 21-month-old yuan peg.
Rising inflation, trade surpluses and portfolio inflows, as well as asset-price bubbles may spur central banks to seek appreciation beyond pre-crisis levels, the note said, adding that monitoring each currency's trade-weighted index is crucial to determining central banks' appetite for further gains.
Policy makers in Australia, Malaysia, India and Vietnam have raised interest rates in recent months. China has twice increased banks reserves requirements as the economy grew in the first quarter at its fastest pace in almost three years.
China may allow the yuan to appreciate by June 30 to curb inflation, while avoiding a one-time jump in value that might endanger export jobs, a Bloomberg survey of analysts showed.
Among Asian currencies, the Taiwan dollar “ticks the most boxes,” he wrote. “It has room to go before it returns to the pre-crisis level, it is managed and so less subject to swings in risk appetite, and benefits from prospects for a gradual appreciation of the Chinese yuan,” he wrote.
The won, rupee, rupiah, peso, ringgit, and Singapore dollar may also continue to appreciate, according to Buchanan.