Goldman Sachs said the U.S. Federal Reserve’s first rate cut in more than four years has eased market fears of a recession, with improved risk appetite likely to boost interest-rate-sensitive Asian currencies.
GS said in a recent note that it expects many emerging market currencies in Asia to outperform, while interest rate markets are also expected to benefit from the Fed’s accelerated easing cycle.
The is expected to outperform in the near term, as are , , and .
On the other hand, India’s GDP growth is expected to lag, amid continued weakness in the Chinese economy. India’s GDP growth is also likely to lag, while India’s GDP growth is expected to remain flat, given the Reserve Bank of India’s preference for exchange rate stability.
While a dovish Fed is expected to prompt rate cuts from most Asian central banks, spreads are set to make regional debt more attractive relative to the US.
GS expects the US Federal Reserve to deliver six consecutive 25 basis point cuts between now and June 2025, indicating a faster easing cycle than initially anticipated.
But the investment bank noted that the US election in 2024 represents a “major risk event” for Asian markets, particularly the potential for higher trade tariffs on China.
GS Bank sees the currencies most exposed to trade headwinds as the won, ringgit and baht.
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