Gold Silver Reports – Trade War Pain for Asian Currencies to Shine Light on Deficits – The current-account deficit is making a comeback as a reason to sell some Asian currencies, according to Credit Suisse Group AG.
U.S. President Donald Trump’s order to impose metal tariffs last week added to the pressure Asian exchange rates are facing this year from a hawkish FederalReserve and rising Treasury yields. While a trade war is unlikely to break out, inflows into riskassets will be stymied, shining the spotlight on countries needing funds to narrow their deficits, said Trang Thuy Le, a macrostrategy analyst in Hong Kong.
“Deficit currencies such as Indonesia’s rupiah, India’s rupee and the Philippine peso are likely to be more vulnerable just because they need funding for their currentaccount deficits, and the environment is not supportive for portfolio flows,” said Trang. “India and Indonesia also have had large inflows into their respectivemarkets recently so they are at risk of a reversal.”
India and Indonesia have recorded current-account deficits since 2005 and 2011, respectively, while the Philippines expects to post a third straight annual shortfall this year.
Since the U.S. Commerce Department recommended imposing tariffs on steel and aluminumimports in mid-February, all but two of Asia’s currencies have weakened, with the rupiah’s slide of more than 1.5 percent the biggest among them. While Indonesia isn’t a notableexporter of those metals, its currency is often seen as a bellwether for how investorsview the region given that foreigners own almost 40 percent of rupiah-denominated government debt. – Neal Bhai Reports (NBR)