EM Asian currencies except SGD likely to rally on hopes of China’s improving situation over coming week, says Scotiabank

The emerging market Asian currencies except the SGD is expected to rally on expectations for China’s improving coronavirus situation in the coming weeks, according to the latest research report from Commerzbank.

EM Asian central banks will maintain their accommodative stance and remain on track for more monetary easing, along with the Fed’s dovish stance. The Fed said in its semi-annual report to Congress released last Friday that the coronavirus outbreak presented a "new risk" to the economic outlook for the US and warned of disruptions in global markets.

In addition, some regional economies will release more fiscal stimulus. On February 7, South Korea’s finance minister Hong Nam-ki said that the nation will provide KRW2 trillion in financial support to small merchants who are expected to take a hit from the rapid spread of the novel coronavirus, the report added.

Earlier on February 5, Malaysia’s finance minister Lim Guan Eng said in a statement that the ministry is put in charge of drafting stimulus package to address economic impact of the coronavirus outbreak.

"We stay with short USD positions versus the CNH, INR and IDR, maintain our short S$NEER position and still expect the THB to underperform the KRW (new target 37.5) and TWD (new target 1.06)," Scotiabank further commented in the report.