Login Open account
International
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider.
Show more
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.
Show less
Asian currencies undermined by trade war Asian currencies undermined by trade war Asian currencies undermined by trade war

Asian currencies undermined by trade war

Forex 4 minutes to read
Strats-Kay-88x88
Kay Van-Petersen

Global Macro Strategist

Summary:  The ongoing China-US trade war looks set to continue with both parties showing signs of settling in for the long haul as regional tensions and trade relationships weigh heavily on Asian currencies.

On Friday, May 3, US president Donald Trump sent forth a pair of tweets that transformed the US-China trade war and scuppered markets' longstanding perception that a deal was imminent. The table below is a table shows the total 2019 return of Asian currencies versus USD until the close on that crucial date; notable outperformers included the Indonesian rupiah at +4.74% and the Chinese renminbi at +3.40%... and that’s unleveraged!

Given the commonplace nature of 5x, 10x or 20x leverage in FX trading, you can see the hefty gains that could have been made on USD shorts. On the bottom end, we had the Japanese yen and South Korean won losing -0.81% and -4.11% versus the dollar respectively.
APAC currencies
Source: Saxo Bank, Bloomberg
The table below shows these currencies' performance since May 3:
APAC currencies
Source: Saxo Bank, Bloomberg
The results are clear: the trade war is significantly impacting APAC FX. Interestingly, the VIX index remains relatively unconcerned at around 16.50 with volatility restrained in other asset classes as well.

The JPY moved from being the second-worst underperformer to the top-ranked outperformer versus USD on a combination of lower US yields and global risk-off. The Thai bhat remains solid on the country's notable, strong growth/low inflation-led divergence from global FX.

The onshore and offshore Chinese currencies are at the bottom of the post-May 3 pile at -2.19% and -2.58% versus USD; we also see additional pressure on the Chinese trading partner proxies of South Korea and Taiwan, whose currencies are -1.28% and -1.74% against the dollar.

A quick, successful resolution of the trade conflict would run profoundly counter to the current, bearish narrative; such a development would likely see the second table's underperformers quickly reverse course. An escalation, however, could push the yen much higher – think 3-5% if China targets Apple or other US tech giants in retaliation for Huawei – with the yuan having the potential to hit 7.00 versus USD.

USDKRW and USDTWD could race higher as well, as both countries would likely push their currencies far lower to counter the deflationary effects of a weaker Chinese yuan.

Quarterly Outlook 2024 Q2

2024: The wasted year

01 / 05

350x200 steen

Macro: It’s all about elections and keeping status quo

Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.

Read article
350x200 charu (1)

FX: The rate cut race shifts into high gear

As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.

Read article
350x200 peter

Equities: The AI and obesity rally is defying gravity

Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.

Read article
350x200 althea

Fixed income: Keep calm, seize the moment

With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.

Read article
350x200 ole

Commodities: Is the correction over?

Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.

Read article
  • 350x200 steen

    Macro: It’s all about elections and keeping status quo

    Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.

    Read article
  • 350x200 charu (1)

    FX: The rate cut race shifts into high gear

    As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.

    Read article
  • 350x200 peter

    Equities: The AI and obesity rally is defying gravity

    Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.

    Read article
  • 350x200 althea

    Fixed income: Keep calm, seize the moment

    With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.

    Read article
  • 350x200 ole

    Commodities: Is the correction over?

    Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.

    Read article

Disclaimer

 The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International
Products & pricing
Platforms
Accounts & service
General
Other
Legal

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.