IGM FX and Rates
By Jonathan Cavenagh 22 Dec 2020
The positive risk bias at the start of 2020 for EM Asia assets didn’t last long. The synchronised global economic upswing quickly unravelled as the COVID pandemic swept through EM Asia economies. The epicentre of the pandemic was in China to begin with and as China went into lockdown Q1 was a write off for economic growth in the region.
From a peak in mid-January to late March, the ADXY currency index lost 5%. There were significant divergences within the region though, with the IDR losing close to 15% against the USD, the baht 8.6% and INR 5.5%. IDR and INR are typically current account deficit currencies and sensitive to broader risk appetite, whilst the collapse in tourism inflows weighed heavily on the baht. In contrast, the PHP was basically flat against the USD in Q1, while the TWD only lost 0.67%. The Philippines has fairly limited offshore investor positioning, which served it well, while Taiwan managed the pandemic very well and this was reflected in relative currency outperformance…