Asian currencies resilient to the greenback - BAML

By FXstreet.com | August 22, 2014 AAA

FXStreet (Guatemala) - Analysts at Bank of America Merrill Lynch noted that the Asian currencies have been relatively resilient to the steady appreciation of the USD versus the majors.

Key Quotes

"Asian currencies have been relatively resilient to the steady appreciation of the USD versus the majors (particularly the EUR) as well as the weakness in broader EM currencies since the beginning of 3Q. Indeed, the correlations of the Merrill Lynch Asia-ex-Japan FX Index (MLFXAXES) to both the DXY Dollar Index and the MLFXGEMS (GEMs FX) Index are at the low end of the post-2008 crisis range (Chart of the Day). In our view, this apparent decoupling of Asian FX from global currency moves can be explained by two distinct factors:"

"Idiosyncratic fundamentals: Strong domestic themes in Asia, particularly policy intervention (China and Korea) and elections (India and Indonesia) have become more dominant drivers of Asian currencies."

"Low US yields: US dollar strength has not been accompanied by higher US yields, limiting the spillover to portfolio flows to Asia that are typically sensitive to higher USD funding costs."

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