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ASIA FX: J.P. Morgan Focused On Relative Value Trades Ahead Of US Election

ASIA FX
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The US bank focuses focuses on relative value trades in the Asia FX space, with the upcoming US election a key event risk.  

J.P. Morgan: "Signs of complacency are visible around the risks of tariffs being imposed, particularly in Asian currencies. Polls and other indicators of expectations of upcoming US election results suggest that Kamala Harris’s chances of winning the presidential election have gone up in recent weeks. This period has coincided with a significant outperformance of Asian currencies, with many currencies now at their strongest levels year-to-date. While some of this has been a reflection of the carry-trade unwind which drove significant yen appreciation through the summer as well as lower oil prices (Asia is an importer), we think it is also reflective of the market placing lower odds of tariffs being imposed. However, polls at both the national and ‘swing state’ level remain close and the difference in polling between both Harris and Trump are not statistically different. Our expectation is that, at least in the first instance, a Trump victory would be USD-positive and would be particularly negative for EM Asian currencies given they would be most exposed to any risks of tariffs being imposed due to their dependence on exports to the US. Accordingly, we continue to have some RV in Asia FX recommendations, with longs in laggards (PHP, TWD) vs leaders (THB) to play on remaining misalignments, while positioning for idiosyncrasy in MYR longs (vs SGD) and RMB shorts (vs TWD, KRW)." 

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The US bank focuses focuses on relative value trades in the Asia FX space, with the upcoming US election a key event risk.  

J.P. Morgan: "Signs of complacency are visible around the risks of tariffs being imposed, particularly in Asian currencies. Polls and other indicators of expectations of upcoming US election results suggest that Kamala Harris’s chances of winning the presidential election have gone up in recent weeks. This period has coincided with a significant outperformance of Asian currencies, with many currencies now at their strongest levels year-to-date. While some of this has been a reflection of the carry-trade unwind which drove significant yen appreciation through the summer as well as lower oil prices (Asia is an importer), we think it is also reflective of the market placing lower odds of tariffs being imposed. However, polls at both the national and ‘swing state’ level remain close and the difference in polling between both Harris and Trump are not statistically different. Our expectation is that, at least in the first instance, a Trump victory would be USD-positive and would be particularly negative for EM Asian currencies given they would be most exposed to any risks of tariffs being imposed due to their dependence on exports to the US. Accordingly, we continue to have some RV in Asia FX recommendations, with longs in laggards (PHP, TWD) vs leaders (THB) to play on remaining misalignments, while positioning for idiosyncrasy in MYR longs (vs SGD) and RMB shorts (vs TWD, KRW)."