Corporates in Asia Pacific cautiously bullish for the region’s currencies

Businesses across the Asia Pacific largely anticipate the value of the USD to fall against other major currencies, including the GBP, Euro, RMB and Singapore dollar (SGD), driven by expectations that central banks will tighten controls, and improving global economic conditions, said research firm East & Partners recently.

Over the second half of 2017, the firm interviewed more than 12,700 businesses across Australia, Canada, France, Hong Kong, Malaysia, Philippines, Singapore, the UK and USA as part of its global Business FX program to determine businesses’ expectations of their home currency against a bucket of international currencies.

According to the research firm, Asia-based corporates predict that the euro will gain 12.7% against the USD to 1.326 by mid-2018. Similarly, the GBP/USD pairing is projected to follow a similar trajectory, edging up to 1.443 in June 2018, the firm said.

Looking ahead, corporates in the region are cautiously bullish for Asian currencies including the SGD and RMB, East & Partners noted.

“Consensus now sees the USD/SGD falling by 3.1 % to 1.321 by mid-year, which is consistent with the slightly more optimistic growth outlook for Singapore,” the firm said in a statement. “The USD/RMB pairing is expected to hit 6.525 by June 2018 as a weaker greenback and improvement in market sentiment, driven mainly by dissipating fear of a hard landing and easing pressure of capital outflow, support the RMB to appreciate modestly.”

Hong Kong businesses the most bearish

While most businesses across Asia have relatively similar expectations, those in Hong Kong are most bearish.

Across the region, it is predicted that the USD will fall 11.3 % against the euro, 10.7% against the GBP and 2.2% against the RMB, whereas the figures estimated by businesses in Hong Kong are noticeably higher at 12.5 percent, 12.4 percent and 3.3 percent respectively.

To capitalize on economic uncertainty, and currency volatility, banks and non-bank FX providers should be offering business customers FX hedging tools that inform and educate decision making processes, in addition to executing them, East & Partners advised.

As businesses look to grow, and move further beyond their domestic and regional markets, the volume of international trade, and by effect, currency trade will increase, providing significant opportunities for those FX providers that have a clear understanding of their clients’ needs and future expectations, the firm added.

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