(Repeats story sent late on Friday)
By Sumanta Dey
BENGALURU, Jan 6 Emerging Asian currencies this
year are set to extend their fall from 2016, as expectations of
faster rate hikes from the Federal Reserve and U.S.
President-elect Donald Trump's promise of fiscal stimulus push
the dollar higher, a Reuters poll showed.
Leading the losses will likely be the Chinese yuan, which
slumped around 6.6 percent in 2016 and was one of the main
reasons for financial market volatility, despite Beijing
supporting it by burning through reserves to offset the impact
These broad conclusions from the views of many dozens of
foreign exchange strategists took into consideration a dramatic
1 percent appreciation in Beijing's partly-managed currency in
the first trading days of the year.
On Friday, the People's Bank of China sharply raised the
midpoint for the yuan by 0.9 percent to 6.8668 per dollar, the
biggest daily hike since removing a dollar peg more than a
decade ago, in yet another attempt to thwart a steady fall in
"What happens in the U.S. this year, whether it is the Fed's
rate hikes or Trump's fiscal policies, will drive Asian
currencies through the dollar and we are forecasting another
year of depreciation across the board," said Khoon Goh at ANZ,
who was the most accurate forecaster of Asian foreign exchange
rates in Reuters polls in 2016.
"But some high-yielding economies with stronger fundamentals
such as India and Indonesia are in a better position to weather
those setbacks, compared to South Korea and Taiwan where the
follow through from China will be felt much more."
The poll of almost 60 currency strategists taken this week
showed the yuan will weaken over 4 percent this year
to 7.20 by end-December 2017 from Friday's 6.91. It is forecast
to fall to 7.00 by end-March and 7.10 by end-June.
That 12-month consensus view is the weakest in several years
of Reuters polls and, if reached, would mark the lowest level
for the closely managed yuan in nearly a decade. The weakest
forecast was even lower, at 7.60 per dollar.
While upcoming economic data from China are expected to show
it entered 2017 on a solid footing, the fact that it has come on
the back of renewed aggressive government spending has raised
concerns of an eventual slowdown and continued capital flight.
China's FX reserves likely fell to $3 trillion in December
from $3.052 trillion in November, the lowest since April 2011,
according to a separate Reuters poll -- extending a trend in
place during most of last year that highlights the difficulty
Beijing faces in preventing the yuan from falling rapidly.
Adding to those risks are Trump's promises to brand China a
currency manipulator and impose heavy tariffs on Chinese goods,
both of which could further escalate tensions between the two
"2017 is going to be a year when investors try to
second-guess what Trump does and we are probably in for quite a
bit of volatility," Goh at ANZ added.
Fed policymakers have already begun factoring in assumptions
of greater fiscal stimulus, and consequently higher growth, into
their forecasts, minutes from its December meeting showed this
week, suggesting rates could rise faster than the three moves
predicted by them now.
That is likely to propel U.S. bond yields and the dollar
higher, in turn denting currencies around the world.
With growth slowing down in several Asian economies from
China to India to Indonesia over the past few years, the path of
their currencies going forward will probably be a major factor
affecting the course of regional economies.
The latest poll predicted losses were likely for all major
Asian currencies, with the Taiwan dollar falling 3.5
percent by end-December, the second most after the yuan.
The South Korean won is forecast to lose 2 percent,
while the Philippine peso, which is usually buffeted by
relations between the country and China, is expected to
depreciate 3 percent this year, adding to last year's 5.3
India's rupee is expected to weaken 2.5 percent
owing to a weakened economy following the government's currency
crackdown and rising global yields.
(For other stories from the FX poll )
(Additional reporting by Shaloo Shrivastava; Polling by bureaus
in Asia; Editing by Ross Finley and Randy Fabi)