EM Asian currencies likely to suffer in near term from Donald Trump’s policies, says Commerzbank

EM Asian currencies are expected to suffer further from U.S. President-elect Donald Trump’s policies and the prospect of ECB QE tapering. The Fed remains on track for a rate rise in December after U.S. November NFP data released last Friday missed market estimate slightly only.

Donald Trump has pledged to spend USD 1 trillion in fiscal stimulus and sticks to his protectionist views laid out during his campaign. Steven Mnuchin, U.S. Treasury secretary nominee, said last Wednesday that ultra-long bond sales would be considered. It spurred market worries and sent long-term UST yields higher.

Last Thursday, U.S. President-elect Donald Trump called NAFTA a total and complete disaster in his first major address since winning the 2016 election when visiting the Carrier plant.

Escalating U.S. inflation expectations stemming from Donald Trump’s pro-growth stance, i.e. Trumpflation risks, have sparked massive capital outflows from the region and weakened regional currencies. Trans Pacific Partnership (TPP) will be withdrawn by Trump, while NAFTA is supposedly getting a rewrite. It is anticipated to undermine some regional currencies of export-oriented economies.

"In addition, the prospect of ECB QE tapering will be negative to EM Asian currencies in our view, as what happened in early October when the possibility was reported by Bloomberg for the first time," Scotiabank commented in its latest research report.