BANGKOK, Thailand – The partial closure of the federal government has shifted the likelihood of reducing interest rates by summer 2024. Investors appear to be hopeful, particularly as it applies to the potential benefit for other currencies such as the Chinese yuan, the Korean won, and the Indian rupee. The Chinese yuan, in particular, is expected to avoid further depreciation, as Chinese officials are contemplating using fiscal stimulus and credit growth to remedy the country’s economic woes, according to Arun Bharath, chief investment officer at Bel Air Investment Advisors. He predicts that the value of the Chinese currency will remain relatively stable.
Moreover, China maintains a controlled exchange rate for its currency, the yuan, which differs from the approach taken by other major currencies like the Japanese yen and the U.S. dollar. Furthermore, the Indian rupee could benefit from carry trades this year, as the U.S. dollar is utilized to purchase high-yielding assets such as bonds. This strategy is expected to work in the Indian currency’s favor, as the Reserve Bank of India may gradually loosen monetary policy in comparison to other central banks, according to Anindya Banerjee, vice president of currency and derivatives research at Kotak Securities. Meanwhile, the South Korean won is anticipated to experience less pressure in 2024 due to improving economic prospects and looser U.S. monetary policy.
“Additionally, the Korean won is also expected to benefit from the global growth outlook, which may result in an upturn in the currency. South Korea’s economic prospects for 2024 and 2025 look promising, with a projected 2.3% growth, in comparison to last year’s growth of 1.4%,” said Monex’s Harvey.