Latest news with #EugeneLeow
Business Times
13-06-2025
- Business
- Business Times
Greenback fades as Singapore dollar, ringgit, baht shine in Asean foreign exchange shift
[SINGAPORE] US-Asean foreign exchange (FX) markets were lukewarm as announcements of a China-US trade agreement revealed few details following talks in London on Wednesday (Jun 11), with widespread uncertainty now becoming the norm for investors. DBS analysts Eugene Leow and Philip Wee said: 'Implied volatility is now reflecting little to no stresses and is essentially back at pre-Liberation Day levels.' This hardly surprised market analysts, who observed that mere hints of favourable news – in a world where policy reversals have become the norm – are no longer as likely to move markets. Maybank analyst Saktiandi Supaat said: 'Markets now show a tendency to react less to sweeping headlines, and only a concrete agreement or something permanent can drive markets into a more lasting direction.' De-dollarisation Indeed, more permanent trends continue to work against the dollar as Asean currencies appreciate amid USD weakness. The dollar index traded at about 98.4 on Thursday morning, having fallen about 5 per cent since before Trump's 'Liberation Day' tariffs on Apr 2. Once-attractive USD deposits are beginning to unwind in Asean portfolios, with pairs such as USD and SGD declining about 4.5 per cent from before the tariff announcement, and the USD/Thai baht falling 5.5 per cent. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Since around 2022, Asean corporates and investors have built up sizeable onshore US dollar deposits, said a Bank of America (BOA) report by FX strategists Abhay Gupta and Claudio Piron. 'FX deposits in most of Asean are near the highs, with a total of US$230 billion across the Asean-4 economies,' they said. Drawn to the greenback's relative strength, higher deposit rates and its reserve currency status, Asian exporters and other investors avoided converting their earnings into local currencies to maintain their dollar holdings. But now, this may be changing. A trend of 'de-dollarisation' has taken hold in global markets as the greenback loses its charm among Asean investors and corporates. 'The dollar is starting to be viewed as overvalued since the end of last year,' Gupta told The Business Times. 'Global corporations have been caught long (in the) US dollar as they held on to their export proceeds for far too long,' UOB said. Gupta said that institutional investors are likely to be the quickest to rebalance their deposits, as themes such as a weakening dollar, uncertainty towards Washington's escalating fiscal deficit, and waning confidence in US credibility prompt a rebalancing away from dollar deposits. Malaysia and Thailand, which run persistent current account surpluses, are likely to experience the strongest appreciation pressures as investors convert US holdings back into local currencies. The two countries feature prominent US holdings in pension funds and mutual funds, which are typically more risk-averse and adopt larger hedging ratios to defend their dollar positions, Gupta noted. Such hedging activity would place further buying pressure on local currencies as financial institutions lock in forward exchange rates, he noted. Together with the Singapore dollar, these three low-yielding currencies have led gains due to their exposure to global trade cycles, the BOA economists said. Corporates and retail investors are likely to rebalance as well, but will not do so as immediately as institutional investors, said Gupta. This will provide lagging tailwinds into Asean currencies such as Indonesia's rupiah and the Philippines' peso. He told BT: 'As the deposits mature, people realise that their total return has not been as attractive, so they gradually convert back to local currency deposits.' Unlike the much quicker drawdowns on the dollar by institutional investors, retail and corporate selling pressure could sustain tailwinds for Asean currencies well into 2026, he said. But others are less certain of the Asean wave's sustainability in the short-term, with UOB noting higher levels of implied volatility in the foreign exchange options markets. 'Historically, such periods of heightened foreign exchange volatility have often preceded phases of weakness in Asian currencies,' said UOB. The bank also cited tariff doubts and slower growth prospects for Asia, cautioning that the region's currency upside may be limited in the near term. UOB projected that most Asian pairs with the greenback would reverse their uptrend through Q3, before resuming their climb in 2026. Central bank moves For countries running high rates, such as the Philippines and Indonesia, the dollar's slide is a welcome shift. As both countries' central banks implement inflation targeting monetary policies, wrote Gupta and Piron, stronger currencies would further mitigate inflation by keeping import prices low. Yet, as uncertainty about tariffs and external demand remains, stronger regional currencies could hurt export competitiveness and have to be carefully managed by central banks, Gupta warned. 'Central banks have been easing, but in a measured way, due to uncertainty towards the final size of the tariffs,' he said.
Mint
12-06-2025
- Business
- Mint
Funds Pile Into Southeast Asian Bonds Even at Record Low Yields
(Bloomberg) -- Investors are making a beeline for Southeast Asian sovereign bonds despite their record low yields amid a shift away from US assets and on bets for further interest-rate cuts in the region. The average of 10-year yields in Southeast Asian nations relative to US Treasuries has dropped to the lowest in data going back to 2011, according to Bloomberg calculations. The region's bonds are benefiting from investors seeking alternatives to US assets as part of the 'sell America' trade fueled by unease over President Donald Trump's policies. A souring outlook on the dollar is providing another tailwind for Southeast Asian bonds. It's boosting local currencies, thereby opening the door for the region's central banks to cut interest rates to support their economies without spurring capital outflows. 'Southeast Asian bonds will continue to benefit from a re-allocation of flows away from dollar assets as the growth and inflation outlook in the region still requires more policy support from central banks,' said Eugene Leow, a fixed-income strategist at DBS Bank Ltd. in Singapore. 'The region's bonds are also still under-owned by foreigners, and have much room to grow back to where they were pre-pandemic,' he added. Foreign demand for Southeast Asian bonds has been robust this quarter, with Malaysia receiving close to $5 billion over this period amid wagers that the nation's central bank, the last rate-cut holdout in the region, would make a move in July. Global funds have also poured $1.4 billion and $2.4 billion, respectively, into Thai and Indonesian bonds since April to put them on track for their largest inflows in at least three quarters. It's not just the hunt for returns that's supporting Southeast Asian bonds, some funds are also looking at Singapore's debt as an alternate safe haven to Treasuries that are being weighed by concern over a spiraling debt and deficits. 'Moody's Ratings downgrade of the US sovereign does highlight the relative fiscal health of Singapore's AAA rating, and I have little doubt that they will continue to attract the interest of more cautious bond investors in the foreseeable future,' said Homin Lee, senior macro strategist at Lombard Odier in Singapore. Singapore's 10-year yield is around 2.30%, near the lowest since March 2022. Similar tenor bonds in Thailand and Malaysia are hovering close to the lowest levels since September 2021 and December that year. Pin Ru Tan, head of APAC rates strategy at HSBC Plc, expects yields in Singapore and Thailand to drop further by the end of the year. She sees Singapore's 10-year yields falling to 2.20% and Thai yields of a similar tenor declining to 1.60% from the current level of 1.68%. More stories like this are available on
Business Times
05-06-2025
- Business
- Business Times
With US credit downgrade, Singapore's AAA bills offer an opportunity for US carry trade
[TORONTO] Some of the safest assets in Asia offer investors a yield pickup to Treasuries in the wake of the US losing its last AAA credit rating. Investors looking to rotate out of the US dollar and into Asia can buy securities issued by the Monetary Authority of Singapore (MAS), which is using them to steer the amount of cash in the banking system. Three-month MAS bills offer yield of about 13 basis points over similar-tenor US government debt when currency-hedging costs are taken into account, according to data compiled by Bloomberg. The financial market turmoil triggered by US President Donald Trump's tariff threats, coupled with Moody's Ratings' decision to cut the US credit ranking last month, is prompting investors to reassess the role of the US dollar in the global economic system. Some are shifting money elsewhere, and Singapore is a popular destination given it's the only sovereign in Asia with a AAA score at S&P Global Ratings. 'Getting the pickup from MAS bills on a swapped basis has always been a popular trade,' said Eugene Leow, a fixed-income strategist at DBS Bank in Singapore. Singapore's government bonds, 'given the AAA rating and prudent government finances, are proving to be very attractive for investors looking to diversify their holdings', he said. To hedge, a US-based investor can exchange US dollars for the Singapore currency in the spot market while simultaneously selling the latter in the forwards market. Investors are increasingly looking to shift assets away from the US due to growing doubts about whether Treasuries offer enough compensation after the recent ratings downgrade and concern that Trump's proposed tax and spending bill will worsen America's finances. When Moody's downgraded the US in May, it warned that the country's fiscal deficit, government debt and interest burden would all rise in coming years. For its part, Singapore has been steadily increasing the size of its debt market. The amount of MAS bills outstanding climbed to S$345.5 billion at the end of May, an all-time high based on data compiled by Bloomberg going back to 2011. There appears to be plenty of demand for the securities. 'There are still some investors out there who need triple AAA-rated assets,' said Winson Phoon, head of fixed-income research at Maybank Securities. Given the record amount of MAS bills outstanding, it 'looks like the inflows are still coming' into Singapore, he said. BLOOMBERG
Business Times
05-06-2025
- Business
- Business Times
Singapore's AAA bills offer an opportunity for US carry trade
[TORONTO] Some of the safest assets in Asia offer investors a yield pickup to Treasuries in the wake of the US losing its last AAA credit rating. Investors looking to rotate out of the US dollar and into Asia can buy securities issued by the Monetary Authority of Singapore (MAS), which is using them to steer the amount of cash in the banking system. Three-month MAS bills offer yield of about 13 basis points over similar-tenor US government debt when currency-hedging costs are taken into account, according to data compiled by Bloomberg. The financial market turmoil triggered by US President Donald Trump's tariff threats, coupled with Moody's Ratings' decision to cut the US credit ranking last month, is prompting investors to reassess the role of the US dollar in the global economic system. Some are shifting money elsewhere, and Singapore is a popular destination given it's the only sovereign in Asia with a AAA score at S&P Global Ratings. 'Getting the pickup from MAS bills on a swapped basis has always been a popular trade,' said Eugene Leow, a fixed-income strategist at DBS Bank in Singapore. Singapore's government bonds, 'given the AAA rating and prudent government finances, are proving to be very attractive for investors looking to diversify their holdings', he said. To hedge, a US-based investor can exchange US dollars for the Singapore currency in the spot market while simultaneously selling the latter in the forwards market. Investors are increasingly looking to shift assets away from the US due to growing doubts about whether Treasuries offer enough compensation after the recent ratings downgrade and concern that Trump's proposed tax and spending bill will worsen America's finances. When Moody's downgraded the US in May, it warned that the country's fiscal deficit, government debt and interest burden would all rise in coming years. For its part, Singapore has been steadily increasing the size of its debt market. The amount of MAS bills outstanding climbed to S$345.5 billion at the end of May, an all-time high based on data compiled by Bloomberg going back to 2011. There appears to be plenty of demand for the securities. 'There are still some investors out there who need triple AAA-rated assets,' said Winson Phoon, head of fixed-income research at Maybank Securities. Given the record amount of MAS bills outstanding, it 'looks like the inflows are still coming' into Singapore, he said. BLOOMBERG
