Investing.com–The Federal Reserve’s first rate cut in more than four years has allayed market fears of a recession, Goldman Sachs said, while improved risk appetite is likely to boost rate-sensitive Asian currencies.
GS said in a recent note that it expects outperformance from several emerging market currencies in Asia, while interest rate markets are also expected to benefit from an accelerated easing cycle by the Fed.
It is expected that the , , and .
On the other hand, the economy is expected to lag, given the continued weakness of the Chinese economy. The economy is also likely to lag, while expected to remain stable given the Reserve Bank of India’s preference for currency stability.
Although a dovish Fed is expected to invite interest rate cuts from most Asian central banks, interest rate differentials are expected to keep regional debt more attractive compared to the US.
GS expects six consecutive 25 basis point cuts by the Fed between now and June 2025, marking a faster easing cycle than initially expected.
But the investment bank noted that the 2024 US election posed a “major risk event” for Asian markets, especially the prospect of higher trade tariffs against China.
GS sees the won, ringgit and baht as the most vulnerable to trading headwinds.
