Asia Chart of the Week

Asian currencies: Relatively resilient and stable

By Global Thought Leadership
18 November 2019
The strength of an economy is often manifested through the relative performance of its currency.

Over the last 1,3 and 5 years, Emerging Asia currencies have displayed resilience when compared to Emerging Market counterparts.

This strength is not by chance rather it is a result that of the multitude of positive changes since the Asian Financial Crisis of 1997. Asia governments have deepened their capital markets, spent more prudently and addressed their trade imbalances So much so, that on average, Emerging Asia is currently a global net lender as opposed to their Emerging Non-Asia counterparts, as evidenced by their positive current account balance

Having large foreign exchange reserves also mean that in periods of heightened uncertainty, Asian governments have the ability to instill confidence in their markets which results in less volatility of the currency. 

The Bottom Line

Emerging Markets are heterogenous and there are differences in quality. However, in periods of stress, investors can find more solace in the relative resiliency and stability of Asian currencies.
Performance over 1,3, and 5 years (%)
Source: Legg Mason, 18 November 2019. Bloomberg daily data as at 12 November 2019, USD. Emerging Market Currencies refer to the Bloomberg The J.P Morgan Emerging Market Currency Index. Emerging Asian Currencies refer to the Bloomberg JP Morgan Asia Currency Index, Latin American Currencies refer to the Bloomberg JP Morgan Latin American Currency Index. Please see “Definitions” for more details. 
DEFINITIONS

The J.P Morgan Emerging Market Currency Index is a spot index of major Emerging Markets which include Brazil, Chile, China, Hungary, India, Mexico, Russia, Singapore, Turkey and South Africa.

Bloomberg JP Morgan Latin American Currency Index is a benchmark for monitoring Latin America’s currency markets on an aggregate basis. It is a spot index of Latin America’s most actively traded currency pairs valued against the U.S. dollar. The index's composition is based primarily on trade weights, with an added filter for liquidity.

The Bloomberg JP Morgan Asia Currency Index is a benchmark for monitoring Asia's currency markets on an aggregate basis. It is a spot index of emerging Asia's most actively traded currency pairs valued against the U.S. dollar. The index's composition is based primarily on trade weights, with an added filter for liquidity.

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