Goldman Expect Recent EM Asia FX Outperformance To Continue

Goldman Sachs note... "Despite the volatility in financial markets, Asian FX rallied against the USD over the past fortnight, with THB, KRW and MYR outperforming all EM currencies. To a large extent this reflects a better growth outlook in Asia and also the fact that there appears to be negligible exposure in Asia to the most troubled US/European institutions. And, while our US and European economists have revised down their growth forecasts, domestic consumption is surging in China (post re-opening) and we have recently revised up our China 2023 GDP forecast to 6.0% (from 5.5% previously). The robust growth outlook in China is likely to be supportive for Asia’s export-oriented economies (South Korea, Taiwan, Thailand, Malaysia and Singapore), which should help to partially offset the slower growth in the US/EU. While markets sift through the extent and breadth of the damage from the banking stresses, we think Asian currencies can continue to outperform the Dollar, Euro and other lower yielding EM currencies. We continue to see USD/CNY move towards our 3m forecast of 6.80, which should also provide an anchor for NJA currencies."