Asia FX Talking: Looking for a way out

The evolving narrative for much of the developed world is of a peak in Covid-19 cases is leading to hopes for an end to lockdowns and the possible re-start of economies. For Asia, things are, inevitably, more complicated, and that is likely to reflect in currency strength in the coming weeks.

China and Korea are well on the road to recovery and both have seen currencies strengthen, though the KRW has recently come under renewed pressure as speculation about the health of North Korea’s leader grows. And China has given the rest of the world a taste of what is in store for GDP with its -6.8%YoY print for 1Q20. Australia and New Zealand too have seen their new-case count drop sharply following lockdowns and both the AUD and NZD have bounced higher.

Thailand and the Philippines have seen lockdowns cap the spread of the virus and may realistically start to consider de-confinement in the coming weeks if cases fall further.

Singapore and Japan after good starts, have belatedly joined those in lockdown as the situations worsen. And the less-than-convincing partial lockdowns in Indonesia and the chaotic lockdown in India has not yet led to any believable improvement, though India is already inexplicitly talking about reopening.

This is a messy backdrop for economies and currencies. That isn’t going to change soon.