The marked rally in Asian currencies in the first half of 2016 is likely to continue into the second half of the year and into 2017 as the US Federal Reserve’s plans to normalize monetary policy are frustrated by domestic economic weakness and global economic headwinds.

Currencies like the Korean won, the Singaporean dollar and the Indian rupee have strengthened against the US dollar and while their fortunes also depend to some extent on those of their neighbor, China, the underlying strength of their economies should be enough to keep them bid into 2017.

“Asian currencies had spent much of the last few years in a downtrend as investors repositioned in anticipation of higher interest rates in the US and began liquidating Asian assets including stocks and bonds,” said Monica Freeman, chief markets strategist at Monex Financial.

“Recent events, however, have begun to change the narrative and more investors are speculating that interest rates in the US won’t be going meaningfully higher any time soon and, therefore, dollar denominated assets aren’t as attractive.”

Indeed, the firm’s recent investor bulletin urged its institutional clients to consider increasing positions in Asian stocks and bonds in anticipation of what it called an “exodus trade”. Citing evidence of a shift in sentiment towards Asia as bullish for the region in the long-term, Monex Financial suggested clients increase exposure to stocks in Malaysia, Thailand and Singapore.

“We see plenty of upside potential in these markets because we don’t believe that the Fed will be able to implement the rate hikes it’s been promising,” concluded Freeman.
About Monex Financial
Monex Financial is a privately held, fully independent investment and wealth management leader, with retail operations based in Toronto, Canada and corporate trading division headquartered in Tokyo, Japan.

From our offices in Toronto the capital city of the province of Ontario and financial and business capital of Canada, we serve private individuals and families from N. America to Europe and with our corporate trading division strategically located in Tokyo, Japan, we have unrivalled access to Asia’s high yielding emerging markets, access to corporate resources, private equity and global mergers and acquisitions.