12 Jun 2015
Asia FX valuations cheaper compared to taper tantrum – BAML
FXStreet (Barcelona) - EM FX Strategists at BofA-Merrill Lynch, note that Asia FX overvaluations are less apparent than they were in 2013, which reduces the risk of sharp devaluations, though USD/Asia is still expected to trend higher.
Key Quotes
“Asia FX overvaluations are less apparent than they were in 2013. This reduces the risk of sharp devaluations, though we are still in the camp that USD/Asia will trend higher.”
“Asia FX valuations in the ongoing sell off are cheaper compared to those prevailing during the 2013 taper tantrum. We use the divergence of FX spot from the long-term fair value of the currencies that is derived from our COMPASS model. Specifically, the CNY and SGD are close to fair value currently. The MYR and IDR overvaluation has narrowed below 6% compared to 13% in 2013. On the other hand, other Asian currencies such as INR and TWD have extended their undervaluation vis a vis the taper tantrum Period.”
Key Quotes
“Asia FX overvaluations are less apparent than they were in 2013. This reduces the risk of sharp devaluations, though we are still in the camp that USD/Asia will trend higher.”
“Asia FX valuations in the ongoing sell off are cheaper compared to those prevailing during the 2013 taper tantrum. We use the divergence of FX spot from the long-term fair value of the currencies that is derived from our COMPASS model. Specifically, the CNY and SGD are close to fair value currently. The MYR and IDR overvaluation has narrowed below 6% compared to 13% in 2013. On the other hand, other Asian currencies such as INR and TWD have extended their undervaluation vis a vis the taper tantrum Period.”