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SINGAPORE : Asian currencies are expected to trend lower against the US dollar going into 2009, according to some foreign exchange strategists.
They said that with global economic growth expected to slow further, Asian regional currencies will be hit even harder over the next two to three quarters.
Global economic growth has slowed sharply in recent months, and it is expected to slow even further. And forex strategists said that this will hurt Asian currencies going forward.
Emmanuel Ng, vice president, Treasury Research and Strategy, OCBC Bank, said: "Previously, we had a very good environment of fairly strong capital inflows into Asia, in terms of the balance of payments into Asian asset markets; fairly strong export growth; and the global economic cycle was on the upturn.
"I think all that has flipped around fairly abruptly. Flows into emerging markets have all but disappeared."
Previously, Singapore had allowed its currency to appreciate against the greenback, to curb inflation. But the Singapore dollar is now seen weakening, in order to make exports more attractive.
For some market watchers, boosting shipments overseas is the challenge for Asian economies.
Mr Ng said: "I think even though lower oil prices will bring down the import bill, the new animal to watch out for would be slower exports going ahead."
Some said Asian currencies may start to bottom out by June next year. But that will be dependent on global economic conditions.
Selena Ling, head, Treasury Research and Strategy, OCBC Bank, said: "I do not think anyone is really talking about recovery in the second half of next year.
"So, I think the earliest we can see a growth recovery (is) probably in 2010 or 2011. But that said, I think the whole de-leveraging process probably still has a lot more room to run."
So, market watchers said investors are staying away from high-yielding currencies.
Going forward, experts said currencies that will remain defensive are those from countries with strong current account surpluses, such as China and India. Investors should also look out for countries with lower short-term foreign debt liabilities. - CNA/ms
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