News May 16, 2023

How are Asian currencies placed to withstand stress?

Deutsche Bank’s Head of Asia Macro Strategy, Mallika Sachdeva, discusses why this time is different for Asian currencies. While Asian currencies experienced significant weakness during the Global Financial Crisis of 2008, they are now in a better position to withstand stress from the global financial system, according to our Sachdeva.

You can also read the full transcript of the video here: 

"In the Global Financial Crisis of 2008, Asian currencies came under extreme stress and weakened significantly.

With a string of bank failures in the US recently, questions are returning about the spill overs to Asian currencies this time, and how corporates should prepare for them.

We believe Asian currencies are far better placed to withstand a crisis today than they were back in 2008, for a few main reasons.

First, foreign investor positioning is much lighter now, with considerable outflows from Asian equities in recent years. This means there is less risk of money rushing out this time.

Second, Asian corporates have hoarded USD deposits in recent years and have more actively hedged their USD risks.

Third, China’s recovery will provide an offset, particularly for services exporters and ASEAN countries aligned with China’s growth.

And finally, valuations are in better shape. All currencies were overvalued in 2007, but many are cheap today.

We share how corporates should navigate, hedge, and prepare for the coming months in our latest Asia Corporate Newsletter."

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