[Alpha Biz= Paul Lee] According to data compiled by Bloomberg, the South Korean won, Indonesian rupiah, Brazilian real, Taiwan dollar, and Indian rupee are among the most undervalued currencies in emerging markets compared to their 10-year averages.



The report added that China’s new economic stimulus measures and signs of progress in trade negotiations between the U.S. and Asian countries are enhancing the appeal of Asian currencies.



The surge in the Taiwan dollar earlier this month has spread across Asia, indicating the possibility of a stronger trend for Asian currencies.



Claudia Calish, head of emerging markets bonds at M&G Investment Management, stated, “(Asian currencies) have been cheap from a fundamental perspective for a long time.” She further explained that investors have been underinvested in Asian currencies due to the large carry trade opportunities in South American currencies, adding, “Though they are starting to adjust a bit, they are still relatively cheap.”



According to Goldman Sachs and Barclays, Bloomberg reported that the South Korean won, which plummeted following the announcement of U.S. tariffs last month, has emerged as a strong candidate for further gains.



Goldman Sachs strategists, considering the degree of undervaluation, the potential for shifting into dollar assets, and the role of the yuan, predicted that not only the South Korean won but also the Malaysian ringgit and South African rand are expected to appreciate.



Barclays analysts also saw significant upside potential for the Singapore dollar and Taiwan dollar.



Bloomberg reported that as concerns over the Trump administration’s policies weaken the appeal of the U.S. dollar, the expectation of trade deal resolutions is shifting investor preferences towards emerging market assets, changing the bearish sentiment around Asian currencies.



The Bloomberg Asian Currency Index has risen by about 3% since its low in April, and this month, global funds have been buying local currency bonds from Indonesia, Thailand, and Korea.



Bloomberg, based on data from the Bank for International Settlements (BIS), pointed out that the South Korean won is the most undervalued currency in Asia, with a depreciation of more than 2% over the past 10 years.



However, Bloomberg added that the sustainability of this upward trend remains uncertain. In particular, the stance of the U.S. Federal Reserve, which has stated it will not rush to cut interest rates, is seen as a factor that could suppress the appreciation of Asian currencies.



Last week, after Federal Reserve Chairman Jerome Powell mentioned that the central bank would not rush to adjust interest rates, the dollar showed some recovery, and many Asian currencies gave back some of their previous gains.

 

 

 

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