Bank of America recently released a research report saying that it is bearish on a range of Asian currencies.Slot328His currency is neutral because the investment bank believes it is the beginning of an "era of chaos".
Bank of America said in its report, "Slot328We are not bullish on any currency in Asia ", many of which have been affected by the postponement of the Fed's easing cycle and the continued strength of the dollar.
The investment bank listed Asian currencies, including the South Korean won, the New Taiwan dollar, the Thai baht and the Vietnamese dong, as bearish.
"neutral" currencies include the Hong Kong dollar, the Indonesian rupiah, the Indian rupee, the Malaysian ringgit, the Philippine peso and the Singapore dollar.
Korean won
Bank of America said there had been a "significant shift" in the won's outlook after the Fed delayed interest rate cuts and geopolitical risks in the Middle East became the main headwinds.
Bank of America economists wrote: "so far this year, we have seen a lot of money flowing into the South Korean stock market, but as global stock markets are getting rid of these two risks, these inflows are starting to reverse."
The South Korean won recently fell to 1389 against the US dollar.Slot328.5 won's 18-month low. The governor of the Bank of Korea called the won volatility "excessive" and said the central bank would intervene if necessary.
Economists at Bank of America say the won is currently overvalued compared with fair value of 1417 won to the dollar.
New Taiwan dollar
Given the large outflows from the stock market and the further unwinding of life insurers' positions in non-deliverable forward foreign exchange trading (NDF), BofA still takes a negative view of the NT dollar. It is reported that NDF is a currency derivatives contract that establishes settlement between the current spot exchange rate and the contract exchange rate.
At present, the exchange rate of the New Taiwan dollar against the US dollar hovers at 32 to the US dollar.Slot328.6 near NT.
Vietnamese dong and Thai baht
At present, the dong is about 25448 dong to the dollar, which has depreciated by nearly 5 per cent so far this year.
Bank of America said the impact of the Fed's delay in cutting interest rates was compounded by political instability in Vietnam and the plight of the real estate sector after the resignation of its second president in two years. The bank said these disadvantages had spurred domestic demand for dollars and gold.
"We revise our estimate that by the end of the second quarter, the depreciation pressure on the dong will fall further to 25600 dong to the dollar, and by the end of the year, the dollar / dong will eventually reach 25700," the report said.
Bank of America said the Thai baht was also vulnerable to geopolitical tensions because of rising oil prices and freight costs. The agency raised its forecast for the Thai baht to 37 to the dollar by the end of the year.
It is worth noting that the investment bank did not mention the yen in the report. The yen, which hovers around a 34-year low against the dollar, has been struggling since the Bank of Japan raised interest rates in March and has fallen below Y150 to the dollar.