The cooling of U.S. inflation has slowed down the pace of interest rate hikes by the Federal Reserve, which has also cooled the dollar’s rise slightly. It is estimated that the exchange rate of the Asian currency will have an average increase of about 4% this year (2023), but the New Taiwan dollar and the Korean won will be dragged down by weak economic data such as exports, and the increase will be limited.
The U.S. Federal Reserve raised interest rates strongly last year, which led to a stronger U.S. dollar. The Asian currency index depreciated by more than 11% against the U.S. dollar in the first October of last year. Asian currencies have appreciated nearly 8 percent since last November.
UBS pointed out that in terms of RMB, with the loosening of epidemic prevention policies and economic recovery, attracting funds to return, coupled with the official introduction of positive real estate measures, it is estimated that the exchange rate of RMB against the US dollar is expected to rise to 6.5.
However, the performance of the New Taiwan dollar and the Korean won may be relatively weak. UBS pointed out that the economic growth indicators of Taiwan and South Korea are still relatively weak. It is expected to drag down the trend of the New Taiwan dollar and the South Korean won.
In addition, regarding the yen, the Bank of Japan continued to implement monetary easing policies, and many investors used the yen as a financing currency. l The yen climbed rapidly.
UBS pointed out that in Japan, inflationary pressures continue to increase, the 10-year government bond yield ceiling may be further raised to 1% in the next few months, and the US Federal Reserve’s interest rate hike cycle is coming to an end. It rose to 120 a month ago.