Deutsche Bank sees Asian comeback as Pimco positive

Indonesian Rupiah

The rupiah, this year’s worst performer among 12 Asian peers tracked by Bloomberg, will climb to 12,000 per dollar by the end of 2014, from 12,200, a separate survey predicts. The currency tumbled to a five-year low of 12,260 on Dec. 23.

China’s yuan and the South Korean won will probably perform better than peers in coming months, while the outlook for Malaysia’s ringgit is improving, according to Manik Narain, an emerging-market strategist at UBS AG.

Concerns remain about India’s rupee, which fell to a record low of 68.845 per dollar in August, and the rupiah, he said. The rupee will end next year at 62 per dollar, from 61.98 today, according to another poll.

With the exception of China and South Korea, “we are not forecasting foreign-exchange appreciation in Asia,” London- based Narain said in a Dec. 20 phone interview. “We are particularly worried about India and Indonesia still.”

India and Indonesia will be the only nations among Asia’s 10 biggest economies to run current-account deficits in 2014, Deutsche Bank estimated in report dated Dec. 19.

Volatility Falls 

Options are also signaling improved confidence in Asian currencies. One-month implied volatility, a gauge of expected moves in the exchange rate that’s used to price these contracts, fell in the past six months for all except one of the region’s 11 most-used currencies, data compiled by Bloomberg show. The measure increased for the rupiah.

Volatility had surged after Fed Chairman Ben S. Bernanke first signaled a reduction in the U.S. central bank’s stimulus program in May. The Asia Dollar Index, which lost 3.5% in the four months through August, has rebounded 0.9% since as markets adjusted to the imminent removal of U.S. bond buying.

After a year when strategy was dominated by expectations for when the Fed would taper stimulus, 2014 will focus on Asian governments’ economic reforms, according to UBS.

China’s leaders pledged last month to accelerate interest- rate and foreign-exchange reforms and to allow market forces a “decisive” role in the allocation of resources. India allowed foreign investors to buy more rupee debt this year and stepped up efforts to rein in its record current-account deficit.

China’s yuan will add to its 2.7% gain this year by climbing to 5.99 per dollar by the end of 2014, from 6.0715 today, strategists surveyed by Bloomberg predict. The currency reached a 20-year high of 6.0702 on Dec. 23.

“The theme for 2014 is looking more at internal fundamentals and commitment to reforming,” UBS’s Narain said.

www.bloomberg.com

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