Bank of America note that “the depreciation in Asia FX until mid-July was precisely in line with its external drivers (U.S. rates, risk, oil & China) - but since then, the muted recovery in Asia FX has lagged what the reversal in these drivers would imply. Normally, we would interpret this as a constructive signal for Asia FX, but we are reluctant to do so - partly because we are not convinced that the bottom in risk, highs in oil and Fed hawkishness are behind us. But we are also apprehensive about a deteriorating export cycle as Western economies slow in H2. Asia export data surprises have unusually persisted at positive levels for over two years but could turn negative in coming months, adding to the pressure on Asia FX.”
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