Asian FX eased in thin trading; Yuan targets second year of gains, best performer

  • The Thai baht is the worst year since 2000
  • Most Asian currencies should end the year in red
  • Indian rupee on track for fourth year of losses
  • Most stocks win in 2021; Malaysian stocks fall

Dec.31 (Reuters) – Most Asian currencies were set to end the second year of the pandemic on a negative note, with the Thai baht considering its worst year in two decades as the tourism-dependent economy remained under pressure in due to the virus. brakes on induced movements.

The South Korean won, which closed on Friday, lost 9.4% this year – its worst performance since 2008 – while the Philippine peso, Malaysian ringgit and Indian rupee were all expected to weaken between 2% and 6%.

However, the Taiwan dollar and Chinese yuan were targeting a gain of more than 2% during the year, with the yuan predicted for a second year of gains and becoming the best performing currency in the region.

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The Chinese yuan, which traded at 6.375 to the dollar on Friday, was forecasting a 2.4% appreciation on strong trade surpluses and strong portfolio inflows during the year despite the overall strength of the US dollar.

Australian and New Zealand Banking Group (ANZ) analysts expect the yuan to remain resilient against the dollar despite the Federal Reserve’s upward cycle next year, and see the currency strengthen further to 6, 30 to the dollar by the end of 2022.

However, analysts at Dutch bank ING said they expected the yuan to be more volatile. Portfolio inflows could slow until 2022 if easing virus restrictions seemed less likely, leading to volatility “in the face of an increasingly hawkish Fed,” they said.

Chinese yuan and Taiwanese dollar gain in 2021

((See FACTBOX-Analysts 2022 outlook for the Chinese yuan for more information))

In Southeast Asia, the Thai baht ended the year down 11.4%, its worst year since 2000, as the economy remained under pressure from a late recovery in tourism, a key source of income for the country.

ANZ analysts see the baht appreciating towards 32.10 by the end of next year, aided by inflows of foreign wallets assuming travel restrictions relax and tourism picks up.

Among regional stocks, India’s Nifty 50 Index (.NSEI) and Taiwan Benchmark (.TWII) are expected to rise around 24% for the year, Indonesian stocks (.JKSE) and Singaporean (.STI) rose around 10%, while the Malaysian stock exchange (.KLSE) was the only outlier, on course to lose around 6% in 2021.

Emerging Asian currencies were largely softened on Friday as stocks traded in the red as low-volume trading boosted market volatility as concerns over the Omicron variant remained on investors’ minds.

“A sharp rise in Omicron cases in the United States and Europe warns of a potential collision course with a hawkish Federal Reserve (in 2022),” Mizuho Bank analysts said in a note.

“At the very least, it increases the risks of policy uncertainty / volatility.”

Markets in South Korea, Taiwan and Thailand were closed for the year-end holidays.


** Indonesian 10-year benchmark yields are 6.376%

** India imposes stricter rules to prevent the spread of COVID-19 Read more

** The head of the South Korean bank promises to adjust the key interest rate in 2022 read more

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Sameer Manekar report in Bangalore

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