Asian currencies might show the steepest monthly increase for the first time in more than six years. In addition, the approaching end of the Federal Reserve’s (Fed’s) monetary policy tightening cycle spurs their growth.
The Bloomberg JPMorgan Asia Dollar Index has grown by 2.7% in November, showing the biggest monthly increase since March 2016. The best result among Asian currencies was demonstrated by South Korea’s won, which grew 7% this month. It was followed by the Thai baht, with a monthly growth of 6.8%.
Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore, noted that although the Fed has an open intention to continue raising interest rates, the main increase of the U.S. dollar has already completed. Regarding this, Asian currencies will have a chance to partially reduce their losses after this difficult year.
At the same time, the risks related to the new coronavirus outbreak in China don’t lose their significance. Asian currencies still have to consider the impact of COVID-19. Currently, traders expect China’s actions after the recent wave of protests. Analysts have different views on the situation. Some of them suppose that this unrest might lead to more restrictions, while others, on the contrary, see the potential for a gradual withdrawal of the Covid Zero policy.