Taiwan’s dollar and the Indonesian rupiah are forecast to lead a recovery in Asian currencies next year as attention shifts to the region’s growth potential and away from the reduction in U.S. monetary stimulus.
The Taiwanese currency will climb 2.4% by end-2014, while the rupiah will start reversing this year’s 20% loss by rising 1.7%, Bloomberg surveys of at least 18 analysts show. South Korea’s won is seen up 1.8%, China’s yuan 1.4% and the Thai baht 1.1%. The forecasts point to a rebound from the Bloomberg-JPMorgan Asia Dollar Index’s 2.2% drop this year, its biggest since 2008.
Taiwan’s potential export gains from a global economic pickup and Indonesia’s yield advantage over most of Asia are adding to the appeal of their currencies as Deutsche Bank AG, the world’s biggest foreign-exchange trader, says the region offers the best growth prospects in 2014. The Federal Reserve’s decision last week to start cutting its monthly bond buying has mostly been priced into Asian exchange rates, setting the stage for advances, Societe Generale SA said.
“We haven’t seen any toxic reaction to the Fed statement, there’s been no bloodbath,” Benoit Anne, the London-based head of emerging-market strategy at SocGen, said in a Dec. 20 phone interview. “When investors come back to work in January, they’re going to realize there’s a huge window of opportunity to go long emerging-market assets.”
Pacific Investment Management Co., the world’s largest manager of bond funds, and Deutsche Bank say Asia will receive a boost from a recovery in developed markets next year. The region’s emerging economies will grow 6.5% in 2014, outpacing the 5.1% expansion of developing nations around the world and 2% for advanced countries, the Washington- based International Monetary Fund forecast in October.
Asian currencies will hand investors a 2% return in 2014, while counterparts in the Europe, Middle East and Africa region will gain 4.5% and Latin America’s will lose 1%, Deutsche Bank predicts.
“Emerging markets are maturing,” Deutsche Bank analysts including New York-based Drausio Giacomelli, wrote in a Dec. 19 report. For growth, “Asia remains best placed.”
The Taiwanese dollar will strengthen to NT$29.3 by the end of next year, according to the median of 18 analyst estimates compiled by Bloomberg, after reaching a four-month low of NT$30.06 yesterday. The currency has lost 3.2% this year, its biggest decline since it fell 5.7% in 2001.