Chinese Yuan

According to BofA, the yuan/dollar exchange rate is anticipated to reach 7.35 in the second quarter of 2024 and weaken to 7.45 in the third and fourth quarters. Currently, the yuan is hovering around 7.24 per US dollar. The bank expects the Chinese currency to remain under pressure in the second half of this year. BofA currency strategists attribute this gloomy outlook to a possible refusal by the US Federal Reserve to ease monetary policy, deflationary trends in the Chinese economy, deteriorating conditions for foreign investment, and a widening yield gap between China and the United States.

South Korean Won

BofA currency strategists also cast doubt on the future of the South Korean won. The Fed’s decision to delay interest rate cuts has hurt the won’s performance. Geopolitical risks and a tense global situation have added fuel to the fire. However, skepticism about the won has not always prevailed. Analysts highlighted a substantial influx of funds into South Korean stocks since the start of 2024. Yet, this stream dried up later as global equities turned negative amid geopolitical uncertainty, BofA economists said. Against this backdrop, the South Korean won plunged to an 18-month low, settling at around 1,389.5 per US dollar. The experts also noted pronounced market volatility, which pushed the won to 1,347.3 against the greenback. According to the bank, the South Korean currency is currently significantly overvalued.

Taiwanese Dollar

The third Asian currency on the BofA list is the Taiwanese dollar. Analysts are bearish on the currency, citing strong capital outflows from the country and further write-offs of non-deliverable forward hedges by insurance companies. In the market, trading the Taiwanese dollar is dominated by non-deliverable forward (NDF) contracts on currency derivatives. NDFs establish settlements based on the prevailing spot rate and the contract value. Currently, the Taiwanese dollar is trading at around 32.6 per US dollar.

Vietnamese Dong

The next currency under pressure according to BofA currency strategists is the Vietnamese dong. This Asian currency is trading at around 25,450 per US dollar, having lost almost 5% against the greenback. Experts at the bank are currently revising their forecasts for the Vietnamese dong. They anticipate a further decline to 25,600 per US dollar by the end of the second quarter. By the end of 2024, this exotic currency is expected to be valued at 25,700 per US dollar. According to BofA analysts, the main factors contributing to its downtrend are political instability in the country, with the president resigning for the second time in two years, and problems in the real estate sector. The Fed’s decision to delay interest rate cuts is another reason why the bank is bearish on the currency.

Thai Baht

The Thai baht closes the BofA list of the top five Asian currencies whose future is rather pessimistic. This exotic currency remains vulnerable amid geopolitical tensions and an overall negative trend. Escalating oil prices and rising freight costs further compound the situation. Earlier, BofA currency strategists expected the Thai baht to rise to 37 against the US dollar. However, this forecast has been revised. Now the bank sees the baht reaching that level only by the end of 2024. In the longer term, however, the Thai currency could enjoy some gains.