Asia FX: Trade negotiations and resilient macro backdrop – MUFG

MUFG’s Michael Wan highlights a mixed global backdrop for Asian currencies, with US Treasuries rallying and the US Dollar (USD) somewhat weaker, while tech stocks decline. He notes resilient Asia macro data, including strong Taiwan exports and South Korea’s current account. Wan also flags China-EU trade negotiations and People's Bank of China's (PBoC) currency stance as key for Asia FX sentiment.

Asia currencies face mixed global drivers

"Overall for Asia, the macro picture looks quite resilient so far, with Taiwan’s September exports up a meaningful 61%yoy, while South Korea’s current account balance continues to be strong reaching around 20% of GDP annualised so far."

"Our base case is for some modest slowing in exports, but given higher levels of activity implies that the AI investment trend continues into 2027 and likely beyond."

"Ahead of EU-China trade negotiations today, the PBOC issued a formal document rejecting claims the CNY is undervalued, and said that China has no need or intent to gain competitive advantages through currency devaluation."

"It also argued that exchange rate adjustments will not resolve structural imbalances in the global economy, pushed back against the IMF’s assessment of CNY’s undervaluation, and also said that it will begin reporting some foreign exchange operation data to the IMF in 2027 as part of efforts to improve transparency."

"Whether EU actually starts to implement some of the key trade safeguard measures talked about including in a recent paper by Germany and France to the EU Commission will be key."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)