APAC | Asia stronger today than in 2013 ahead of Fed taper

Notwithstanding Covid-related risks, we expect Asian currencies will show resilience in the face of tighter US monetary policy, particularly when compared to the 2013 taper tantrum.

What you will learn from this report:

• Most economies are less reliant on external financing of their debt and current account balances; plus, they have significant foreign reserves they can draw on in the event of tighter external funding.
• Nonetheless, we expect those with current account deficits – the THB, PHP, IDR, and INR – to weaken in the short term against the USD.
• However, we expect depreciation pressures to be limited, as we estimate that the IDR and THB are now “undervalued” by between 6% and 11%, with the others around “fair value”.
• This should also help reduce the risk of large foreign outflows in case of a sharp rise in risk aversion.