Currencies

[Amaunet]

Asian currencies to rise in tandem with China’s yuan

December 17, 2004


Asian currencies are expected to appreciate over the next five years following an appreciation in the Chinese yuan.

Citigroup's head of Asia-Pacific economics and market analysis, Don Hanna, expects the yuan to appreciate from 8.28 against the US dollar to 8.11 next year, and to rise to 6.27 to the greenback by 2009.

His forecast is that the Indian rupee, Indonesian rupiah, Korean won, Malaysian ringgit, Philippine peso, Singapore dollar, new Taiwan dollar and Thai baht will all appreciate from next year onwards.

He also forecast that the Hong Kong dollar would maintain its fixed exchange rate to the US dollar.

On the ringgit, Hanna expects the currency to appreciate to RM3.16 to the dollar in 2009.

He anticipates China would record a gross domestic product (GDP) growth of 8.5% next year, while the Asian newly industrialised economies comprising Hong Kong, Singapore, South Korea and Taiwan would post an average growth rate of 3.8%.

Among the economies of South-East Asia, Indonesia, Malaysia, the Philippines, Thailand and Vietnam are expected to grow by 5.1%.

Although inventories of electronics are building up, Hanna said the slowdown in the tech sector next year would be shorter and shallower than in 2001.

He said electronics still accounted for a big portion of total exports for countries such as the Philippines, Singapore and Malaysia, but noted that electronics exports as a percentage of GDP were falling.

“US investment in 2005 is going to re-accelerate as the US corporate sector is cash-rich for the first time since 1976,' he said.

He does not think that the United States will be able to reduce its current account deficit to below 5.5% to 6% of GDP.


http://biz.thestar.com.my/news/story.asp?file=/2004/12/17/business/9686603&sec=business