Year of Wooden Horse or Wooden Spoon for emerging markets?

SINGAPORE – A new research paper from ANZ Bank suggests that the upcoming Chinese Year of the Wooden Horse could turn out to be the Year of the Wooden Spoon for some emerging markets in Asia.

“Sentiment towards Asian currencies (and Emerging Markets generally) remains poor,” ANZ says. “Strong domestic data is being ignored, a sign that improving growth prospecs in the region will not necessarily lend support to currencies.

“USD/Asia is diverging from US yields, which we take as an indication that it is no longer just a simple taper story driving Asian currencies.”

For 2014, ANZ is forecasting the EUR and GBP to strengthen against the USD (to 1.42 and 1.69 respectively by end-2014). “But there are headwinds ahead that will weigh on Asian currencies, even if growth in Emerging Asia was to improve.”  www.live.anz.com (ATI).