FXFX Talking
Asia FX Talking: Renminbi set to come under more pressure
Softer US data and a mixed set of tariff news have seen Asian currencies trade on a relatively steady footing over the last month. But with Asia responsible for the lion's share of the $1tr+ US goods trade deficit, it'll be on the front line when it comes to reciprocal tariffs in April. Expect pressure to build on the renminbi, but authorities to hold the line
Main ING G10 FX Forecasts
| USD/CNY | USD/KRW | USD/INR | ||||
| 1M | 7.28 | ↑ | 1450 | ↓ | 87.00 | ↓ |
| 3M | 7.34 | ↑ | 1475 | ↑ | 88.00 | ↑ |
| 6M | 7.31 | ↑ | 1450 | ↑ | 88.00 | ↑ |
| 12M | 7.25 | ↑ | 1425 | ↓ | 89.00 | ↑ |
USD/CNY: CNY strengthened as Two Sessions signals confidence
|
Spot
|
One month bias | 1M | 3M | 6M | 12M |
|---|---|---|---|---|---|
|
USD/CNY
7.2475
|
Mildly Bullish | 7.28 | 7.34 | 7.31 | 7.25 |
- USD/CNY strengthened over the past month, trading in a range of 7.22-7.31. The People’s Bank of China continues to aid currency stability via the counter-cyclical factor in its daily fixing.
- Some choppiness within this band: another surprise 10% tariff hike on 4 March sent the CNY weaker but it rallied after strong targets set at the Two Sessions and global developments. Fund inflows amid a rally of Chinese equities also supported the CNY.
- Considering the recent rally and various uncertainties ahead, we hold a slight CNY bearish bias over the next month; tariff risks look high for April, and it’s possible we will also see monetary easing. We hold our 2025 call for a 7.00-7.40 fluctuation band.
Source: Refinitiv, ING forecasts
USD/KRW: Political situation to shape the future of the KRW
|
Spot
|
One month bias | 1M | 3M | 6M | 12M |
|---|---|---|---|---|---|
|
USD/KRW
1456.80
|
Neutral | 1450.00 | 1475.00 | 1450.00 | 1425.00 |
- The KRW broke through the 1,460 mark again due to increased political uncertainty at home. With a decision from the Constitutional Court expected soon, further volatility seems inevitable.
- Once domestic politics gets a clearer focus, we expect some unwinding of recent KRW weakness, but to be only short-lived as the global tariff war may hit sentiment.
- The Bank of Korea is likely to pause its easing in April, while supplementary budget issuance will take centre stage of policy support.
Source: Refinitiv, ING forecasts
USD/INR: More downside pressure on INR in the near term
|
Spot
|
One month bias | 1M | 3M | 6M | 12M |
|---|---|---|---|---|---|
|
USD/INR
87.02
|
Neutral | 87.00 | 88.00 | 88.00 | 89.00 |
- INR underperformed most of the region and appreciated by just 0.1% vs the USD last month. The RBI likely continued to intervene last month to support the rupee. Recall that the RBI net sold over USD35bn in 2H24 to contain depreciation pressures on INR.
- Foreign outflows accelerated with foreign selling in the equity markets close to USD16bn so far this year. The cyclical growth correction for the domestic economy, despite easing of the dollar index, has been a key trigger.
- In addition, liquidity injections by the central bank have been driving bond yields lower. Growth moderation and overvaluation of REER as well as equity markets should mean INR trades with a downside bias in the near term.
Source: Refinitiv, ING forecasts
USD/IDR: Weaker IDR given higher sensitivity to rate differential
|
Spot
|
One month bias | 1M | 3M | 6M | 12M |
|---|---|---|---|---|---|
|
USD/IDR
16425.00
|
Neutral | 16500.00 | 16000.00 | 15500.00 | 15200.00 |
- IDR performance was the weakest in ASEAN-5 as global risk-off exerted downward pressure on the rate sensitive IDR. The central bank likely intervened both in the spot and NDF markets to contain the volatility.
- Fitch ratings affirmed Indonesia’s investment grade credit rating but warned of the fiscal uncertainty that lies ahead, projecting a higher fiscal deficit at 2.5% in 2025 as Prabowo's decision to scrap VAT this year results in a revenue loss of c.0.3% of GDP.
- Return of USD strength in the near term is likely to be the dominant factor impacting IDR in the near term. Although Indonesia is relatively less exposed to US tariff risk, escalation of tariff talks is likely to keep Asian currencies under pressure.
Source: Refinitiv, ING forecasts
USD/PHP: Outperformance is overdone
|
Spot
|
One month bias | 1M | 3M | 6M | 12M |
|---|---|---|---|---|---|
|
USD/PHP
57.43
|
Neutral | 57.50 | 58.00 | 58.50 | 57.50 |
- PHP continued to be one of the strong performers in Asia last month, appreciating by 1.2%. However, we expect the currency to turn weaker over our forecast horizon.
- Overall balance of payments has been weakening since October 2024, with a wider current account deficit, weak FDI and personal remittances inflows. The current account deficit widened sharply to 4.5% of GDP in fourth quarter 2024.
- FDI inflows have been weak too. Philippines hasn’t benefitted as much from the supply chain diversification and China+1 strategy as much as some of its Asian peers have. This is true especially for the electronics sectors where countries like Vietnam, India and Malaysia have gained global export market share.
Source: Refinitiv, ING forecasts
USD/SGD: SGD NEER to drift lower on slower growth and inflation
|
Spot
|
One month bias | 1M | 3M | 6M | 12M |
|---|---|---|---|---|---|
|
USD/SGD
1.3368
|
Mildly Bullish | 1.34 | 1.36 | 1.37 | 1.35 |
- SGD outperformed most of the region ex-JPY and appreciated by 1.6% vs the USD last month given its high correlation with EUR. We continue to expect SGD to depreciate against the USD as Singapore remains highly exposed to weakness in global trade.
- Core inflation in Singapore fell sharply to 0.8% in January, hitting a three-year low, driven by lower prices for services and accommodation. This has increased the probability of further monetary policy easing by the MAS in April with another modest reduction in slope of SGR NEER appreciation.
- We continue to expect the trading range of SGD NEER to drift lower in 2025 driven by slower growth and inflation, and USD/SGD to trade in the 1.35-1.37 range in six months.
Source: Refinitiv, ING forecasts
USD/TWD: Limited domestic catalysts as CBC looks set to hold
|
Spot
|
One month bias | 1M | 3M | 6M | 12M |
|---|---|---|---|---|---|
|
USD/TWD
32.99
|
Mildly Bearish | 32.80 | 33.00 | 33.00 | 32.50 |
- The USD/TWD pair remained stable for another month, remaining within the same range of 32.7-33.1. The TWD has generally tracked closely with the broader USD trend, suggesting limited domestic side catalysts.
- Domestic drivers of the TWD were mixed over the last month. US-Taiwan yield spreads narrowed on the month, but equity market flows showed net outflows over the past month.
- The next CBC meeting is on 20 March, and we expect the bank to stand pat. Language had been leaning hawkish at previous meetings, but the market is still pricing in a cut rather than a hike as the next move, especially as inflation undershot in 2024. The meeting is worth monitoring for surprises in either direction.
Source: Refinitiv, ING forecasts
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This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more