focus fx outlook 2018-19 open for business”, president donald trump has stopped complaining about...

Refer to important disclosures at the end of this report.

Philip Wee FX Strategist

Please direct distribution queries to Violet Lee +65 68785281 [email protected]

The US dollar is making a comeback

The factors responsible for the US dollar’s depreciation over the past year have started to reverse. The US 10-year Treasury yield has been rising towards 3% since the start of 2018, well above the 2.60% the same time last year when the US Dollar Index (DXY) was above 100. Unlike in 2017, we now have a Fed that is looking for US inflation to rise towards its 2% target this year. Corporate tax cuts and a new Fed chair in favour of expanding bank credit to families/businesses should be net positive for growth. With the DXY low at around 90 and “America open for business”, President Donald Trump has stopped complaining about a strong greenback but his protectionist tendencies remain a concern. Nonetheless, we have upgraded our US growth outlook and brought forward our Fed hikes call by a quarter to March and June.

The pressures on the Eurozone and Japan to bring forward monetary policy normalisation have receded after the market volatility in early February. The Bank of Japan has pushed back against “stealth tapering” allegations and reaffirmed its commitment to its quantitative and qualitative easing as well as yield curve control policies. Unless the euro surprises with more appreciation, say to 1.30, the European Central Bank (ECB) will not extend the end of its asset-purchase programme (APP) from September to December.

For now, we assume that the euro has graduated into a higher “pre-normalisation range” of 1.15-1.25 from its

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The US dollar is oversold compared to a year ago

DXY Index(right)

US 10Y bond(%, right)

DBS Group Research 12 March 2018

Focus

FX outlook 2018-19 The US dollar is Fed up

CNY: Not a one-way appreciation bet

HKD: In the weaker half of its convertbility band

INR: Volatility to pick up

IDR: A bit more volatility

MYR: Corrected 2016-17 depreciation

PHP: A new record low in 1-2 years

KRW: Not as won-derful as last year

SGD: Weaker against the basket

THB: No encore to last year’s solid performance

VND: Still stable, but not as much steady as last year

AUD: Weighed by negative rate differential vs the US

GBP: Pounded by Fed hikes &and Brexit uncertainties

EUR: A pre-normalisation range b/w 1.15 and 1.25

JPY: Monetary divergence vs risk aversion

USD: Supported by the Fed’s improved outlook

mailto:[email protected]

FX: The US dollar is Fed Up 12 March 2018

previous 1.05-1.15 band seen after the ECB launched quantitative easing (QE) in 2015. As the focus on normalisation turns from the ECB to the Fed, the euro should start to retreat from the ceiling of its new range. Don’t expect a repeat of last year’s political/economic surprises. Eurozone growth has started to moderate from its six-year peak of 2.8% YoY in 3Q17. German Chancellor Angela Merkel has finally formed a grand coalition but she and her allies have been weakened by the process. An increase in Euroscepticism was evident at the Italian elections on 4 March, but this was more about voters rejecting establishment parties than about exiting the EU.

The yen should also weaken back into its 110-115 range as rate differentials reassert themselves again, on the precondition that global equities do not falter and result in a flight to safety into the yen.

The next Fed hike in March has scope to hurt the Australian dollar, the Korean won, and the Thai baht, the currencies with policy rates at the same level as the Fed Funds Rate. Despite their more optimistic growth outlook, inflation in these three countries are subdued below their official targets. More importantly, the Reserve Bank of Australia does not see a need to follow other central banks in hiking rates. The Thai finance ministry has upgraded its growth outlook on the assumption for no rate hikes this year. The Bank of Korea is not in a hurry to follow through on its last rate hike in November.

The reflation-led rally in Asian currencies was tripped by the global market volatility in early February. By 2 March, the Korean won, the Indian rupee, and the Indonesian rupiah have joined the Philippine peso in depreciating for the year. The rupee, the rupiah, and the peso are the only three Asian currencies (that we track) with twin current account and fiscal deficits. The peso remains weak from overheating risks; inflation is set to

exceed its official target amidst a record-wide trade deficit this year. Unlike in 2017, the rupee and the rupiah will be less immune to Fed hikes due to rising inflation and higher 10-year bond yields in the US. Between the two, higher oil prices are more negative for the rupee, which has started to feel the spillover effects of the sell-off in India’s bond market.

Conversely, the Vietnamese dong is likely to remain the most stable Asian currency as long as its trade/current account surpluses are intact. Some volatility could return if equities falter and hurt the government’s privatisation plans to support growth. As for the undervalued Malaysian ringgit, it has not been known to buck the trend when Asia’s currencies depreciate. On a positive note, its current account surplus has stopped narrowing for the first time in three years, thanks, in part also, to higher oil prices.

Overall, 2018 will be a challenging year for Asian currencies. GDP growth is expected to moderate with the external sector, not helped by last year’s strong currency appreciation also keeping inflation below target in many countries. The scope to turn to monetary and fiscal policies to support growth is less this year if equities fail to rally amidst rising US rates.

1.001.051.101.151.201.251.301.351.40

14 15 16 17 18

EUR/USD: a higher pre-normalisation range

QE range: 1.05-1.15

Pre-normalisationrange: 1.15-1.25

4.0 3.52.7

1.5 1.5

-0.2 -0.3 -0.3-1.8 -2.0

-4.3-6-4-20246

THB MYR CNY TWD SGD KRW VND HKD IDR INR PHP

More Asian currencies have depreciated this year% YTD vs USD, as of 9 March 2018

-4-3-2-101234

IN ID PH MY VN

South & Southeast Asia: Countries with widening twin deficits are more vulnerable to rising US rates% of GDP for years 2017, 2018, 2019 CA: Current Account

CA Budget CA Budget CA Budget Budget Budget

CA CA


Chinese yuan

The yuan is not a one-way appreciation bet

• The Chinese yuan’s strong appreciation at the start of 2018 is unsustainable. At its strongest level on 7 February, the yuan has risen to 6.2525 vs the US dollar. This 4.1% YTD appreciation is untenable when compared to the full-year gain of 6.1% in 2017. At this level, the yuan had also recovered 94% of its post-devaluation losses.

• Latest developments suggest that China is no longer overly concerned about capital outflows exerting undue and severe depreciation pressures on the yuan. First, China relaxed in January the counter-cyclical adjustment factor (CCAF) to the calculation of the USD/CNY fixing, which was introduced in May 2017 to stabilise the yuan from outflows. Second, the Qualified Limited Partnership (QDLP) plan, an outbound investment scheme, was revived in February after its suspension two years ago.

• Non-financial outbound direct investment (ODI) rebounded 39.7% YoY in January after a 29.7% contraction for the whole of 2017. There were no new investments in unproductive projects linked to real estate, sports or entertainment. About 11.4% of January’s ODI were invested in 46 countries along the Belt and Road. These investments were in line with the administrative measures for ODI published by the National Development and Reform Commission (NDRC) in late December.

• Having stabilised the yuan from depreciation pressures, China will push towards a two-way exchange with China Inc less inclined to pursue unilateral appreciation/depreciation bets. Hence, we look for USD/CNY to remain flexible and stable within a 6.20-6.60 range this year.

• As GDP slows this year, there will be scope for some payback in the yuan. With the exchange rate stable, China will now proceed to shift the focus on the economy from quantity to quality. There will be no hard economic targets for the next ten years. But the government is still commmitted to meeting its current goal to double GDP in the decade to 2020. To achieve this, growth would need to average 6.3% over the next three years.

DBS forecastsYear Q1 Q2 Q3 Q4

USD/CNY 2018 6.39 6.49 6.60 6.562019 6.52 6.48 6.44 6.40

Policy rate 2018 4.35 4.35 4.35 4.35% 2019 4.35 4.35 4.35 4.35

10Y bond 2018 3.90 4.00 4.00 4.00% 2019 3.95 3.90 3.85 3.80

2015 2016 2017 2018 2019Real GDP 6.9 6.7 6.9 6.4 6.2

CPI 1.4 2.0 1.6 2.1 2.2Curr a/c 2.8 1.8 1.4 1.2 0.9Budget -3.4 -3.4 -3.7 -3.7 -3.9

% YoY for GDP & CPI, % of GDP for current account & budget balances

DBS forecasts in red, historical data in black

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6.20

6.40

6.60

6.80

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6.20

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6.60

6.80

7.00

Jan-15 Jan-16 Jan-17 Jan-18

9 Mar: 6.3344USD/CNY

15002000250030003500400045005000

6.46.56.66.76.86.97.07.17.2

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6.5% growth target

Moving growth focus from quantity to qualityReal GDP, % YoY Shanghai Composite Index

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3% inflation target

Core inflation% YoY

Interest rates are not too concerned about inflation

CPI, % YoY

CFETS 7D repo, %


Hong Kong dollar

USD/HKD in the upper half of its convertibility band

• We expect the HK dollar to remain in the weaker half of its 7.75-7.85 convertibility band this year. US interest rates have widened their differentials against their HK counterparts but we don’t expect this to threaten the longstanding HK dollar peg to the US dollar.

• During the first two months of 2018, the 3-month Libor-Hibor spread has widened to 90 bps from 38 bps. The 3-month Libor spiked to 1.98% from 1.69% on renewed expectations for three Fed hikes this year. Conversely, the 3-month Hibor eased to 1.08% from 1.31%, depressed by abundant liquidity from capital moving into the territory’s markets and assets.

• Until recent days, USD/HKD has been fairly stable around the mid-point within the upper half of its convertibility band. There is a distinct difference between a USD/HKD rate underpinned by positive US-HK rate differentials and a HK dollar under depreciation pressure from capital outflows. With more Fed hikes coming, the Hong Kong Monetary Authority (HKMA) is not likely to act until USD/HKD hits 7.85.

• Stress could, however, emerge if Fed hike expectations turn too hawkish and trigger a sell-off in global stock markets. If so, the HKMA will be obligated to prevent the HK dollar from depreciating out of its convertibility band. The HKMA could sell Exchange Fund Bills (EFB) to lift short-term HKD rates and narrow their differentials with their US counterparts. The HKMA remains confident about managing volatile markets and capital outflows, and will be committed to defend the HKD peg at 7.85.

• Finally, the HK dollar has yet to fulfill the four conditions listed by the HKMA to shift its peg towards the Chinese yuan. These include 1) a fully convertible yuan; 2) a China with an open capital account without capital controls; 3) sufficient yuan assets to support Hong Kong’s monetary base; and 4) a HK economy that is more synchronised with China than the US.


USD/HKD 2018 7.82 7.83 7.83 7.822019 7.82 7.81 7.81 7.80

3mth Hibor 2018 1.40 1.65 1.65 1.90% 2019 1.90 2.15 2.15 2.40

10Y bond 2018 2.30 2.30 2.30 2.35% 2019 2.45 2.50 2.50 2.50

2015 2016 2017 2018 2019Real GDP 2.4 2.0 3.8 3.3 2.5

CPI 3.0 2.4 1.5 2.0 2.5Curr a/c 3.3 3.8 3.0 3.1 3.2Budget 1.9 3.3 7.5 1.6 1.4



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USD/HKD 9 Mar: 7.8364

USD/HKD (left)

3M Libor less 3M Hibor(bps spr, right)

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Bond market volatility amidst a high stock market

Hang Seng Index(right)

HK 10Y bond(%, left)

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Real GDP, % YoY

3M Hibor% pa

Growth moderates to official target range

Underlying inflation% YoY

Govt's 3-4% growth forecast

CPI, % YoY

Govt's inflation forecast


Indian rupee

Rupee volatility to pick up

• The Indian rupee has been stable within a 63-66 range vs the US dollar since 2Q17. This is unlikely to last. We expect rupee volatility to pick up this year as India targets to lift GDP growth to 7-7.5% in FY19 (ending March 2019) ahead of the general elections due in May 2019.

• The central government led by the ruling Bharatiya Janata Party’s (BJP) has decided to tolerate some fiscal slippage to address the key factors (youth joblessness, the agrarian debt crisis) responsible for its dismal performance at the Gujarati elections.

• The fiscal deficit will remain at 3.5% of GDP in FY18, instead of falling to 3.3% from 3.5% in FY17. India is now expected to hit the 3% target in FY20 instead of FY19. On a positive note, international rating agencies have been comfortable with the government’s decision to delay the fiscal consolidation plan by a year.

• Instead, we expect the depreciation pressure on the rupee to come from a widening in the current account deficit, first to 1.8% of GDP in FY19, and finally to 2.2% in FY20. According to Economic Survey 2018, every US$10/barrel increase in oil prices is estimated to add US$9-10bn to the current account deficit, trim growth by 0.2-0.3%, and raise WPI inflation by 1.7%. The survey assumed that oil prices would rise 12% in FY19.

• Against this background, the Reserve Bank of India (RBI) expects inflation to stay elevated in the upper half of the official 4±2% target band in FY19. The RBI has projected inflation to be firm at 5.1-5.6% in April-September (H1 FY19) before easing back to 4.5-4.6% in October-March (H2 FY19).

• In the face of wider twin deficits and elevated inflation, the rupee will be less immune to headwinds from rising US interest rates this year. Unlike in the past couple of years, the Fed now expects US inflation to rise this year. With US tax cuts and fiscal spending to underpin growth, the Fed is looking at three or four rate hikes this year.


USD/INR 2018 64.7 65.9 67.0 67.22019 67.4 67.6 67.8 68.0

Policy rate 2018 6.00 6.00 6.00 6.00% 2019 6.25 6.25 6.50 6.50

10Y bond 2018 7.60 7.70 7.80 7.90% 2019 7.95 8.00 8.00 8.00

FY15 FY16 FY17 FY18 FY19Real GDP 7.5 8.0 7.1 6.6 7.2

CPI 4.9 5.0 3.3 3.7 4.6Curr a/c -1.1 -0.6 -0.7 -1.8 -2.2Budget -3.5 -3.7 -3.5 -3.5 -3.2


DBS forecasts in red, historical data in black. FY ends in March

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9 Mar: 65.168USD/INR

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Bond yields higher, Sensex lower

Bombay Sensex(right)

10Y INGov bond(%, left)

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Real GDP, % YoYRBI reverse repo, % pa

HIgher growth, higher inflation in FY19

CPI, % YoY

4±2% inflation target

7-7.5% growth target

Core inflation% YoY


Indonesian rupiah

More rupiah volatility, but only a bit more

• The Indonesian rupiah is set to be a little more volatile after 1-2 years of stability. We expect USD/IDR to move into a higher 13,500-14,000 trading range for the rest of the year. The 2018 state budget has assumed a rupiah rate of 13,500 vs the US dollar.

• The primary source of rupiah volatility is external. The rupiah’s stability in the 2016-17 was easily attributed to strong investor confidence in the country’s equities and bonds. The global reflation trade is currently being challenged by a better and rising US growth/inflation outlook that threatens to lift the US 10-year bond yield above 3%. Unless the US rate outlook turns decidedly hawkish, the rupiah’s depreciation is expected to be orderly.

• External pressures on the rupiah will be partly offset by domestic fundamentals in Indonesia. Finance Minister Sri Mulyani Indrawati, in February, was awarded the Best Minister in the World Award, a testimony to a well-managed economy. The 2017 unaudited budget deficit was 2.42% of GDP, less than the previous estimate of 2.57%.

• Bank Indonesia (BI) has successfully lowered and kept inflation stable within its target in the past two years. A third year of trade surpluses was reported in 2017. Despite its twin current account and fiscal deficits, there are no signs of macroeconomic imbalances or overheating.

• Looking ahead, economic growth is expected to pick up for a third straight year in 2018. Domestic demand – investment, household consumption, and fiscal spending – is set to be stronger ahead of the local elections in June this year, and the presidential/general elections set for April 2019.

• Based on its assumption for three Fed hikes this year, BI will refrain from rate cuts and, instead, relax reserve requirements rules in July and October. This strategy will provide banks more flexibility in managing liquidity and boosting lending to support investments. Some rupiah depreciation will probably be tolerated, as long as it is in line with regional trends, to help exports without threatening inflation.


USD/IDR 2018 13,596 13,747 13900 13,9602019 14,019 14,079 14,140 14,200

Policy rate 2018 4.25 4.25 4.25 4.50% 2019 4.75 5.00 5.00 5.00

10Y bond 2018 6.50 6.60 6.70 6.80% 2019 6.90 7.00 7.10 7.20

2015 2016 2017 2018 2019Real GDP 4.9 5.0 5.1 5.3 5.4




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9 Mar: 13,797USD/IDR

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Real GDP% YoY

BI 7D repo% pa

Steady-to-firmer growth amidst stable inflation

CPI inflation, % YoY2.5-4.5% inflation target

5.1-5.5% growth target

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Indonesia's markets are still attractive to foreign investors10Y govt bond yield, %

10Y bond

JakartaCompIndex


Malaysian ringgit

The ringgit has corrected its 2016-17 weakness

• The Malaysian ringgit has spent the past year appreciating back to its strongest level seen in April 2016. Looking ahead, the positive factors that propelled the ringgit to become Asia’s second best-performing currency in 2017 will start to wane.

• First, don’t expect the economy to repeat its robust 5.9% growth seen in 2017. We have projected growth to moderate to 5% in 2018, at the lower end of the government’s 5-5.5% target, but still remain above the 4.2% low seen in 2016. More importantly, growth is expected to be broader, with firmer domestic demand offsetting some of the slack in the external sector.

• Second, the government has acknowledged the rating agencies’ assessment that it would not be able to meet its balanced budget goal by 2020, a target likely to be extended to 2022-23. Faced with a tough election that must be held by August, Prime Minister Najib Razak increased spending in the budget unveiled last October. To keep its sovereign debt ratings within the A band, Malaysia will, however, keep to a fiscal consolidation path by targeting a lower budget deficit of 2.8% of GDP vs 3% last year.

• Third, there will be at least two more Fed hikes in March and June this year before the next rate increase in Malaysia. On 25 January, Bank Negara Malaysia started to normalise monetary policy with a 25bps hike in its overnight policy rate (OPR) to 3.25%, its first increase in 3.5 years. Since then, CPI inflation has fallen to 2.7% YoY in January, below the policy rate. Unless inflation extends its decline below this year’s official 2.5-3.5% target (which was lowered from 3-4% last year), we see one more OPR hike to 3.50% in 3Q18.

• General election, or GE14, must be held on or before 24 August. Prime Minister Najib and his Barisan Nasional party need to secure 112 out of the 222 seats contested for a parliamentary majority. The party won 133 seats in the last election held in May 2013. The race is likely to be a close one, given that five out of the 13 states are swing states, two of which are governed by the opposition.


USD/MYR 2018 3.95 4.08 4.20 4.182019 4.16 4.14 4.12 4.10

Policy rate 2018 3.25 3.25 3.50 3.50% 2019 3.50 3.50 3.50 3.50

10Y bond 2018 3.90 3.95 4.00 4.05% 2019 4.10 4.10 4.10 4.10

2015 2016 2017 2018 2019Real GDP 5.0 4.2 5.9 5.0 5.0




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9 Mar: 3.9115USD/MYR

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Real GDP, % YoYBNM o/n policy rate, % pa

Malaysia's growth/inflation to moderate lower in 2018

CPI inflation, % YoY

2.5-3.5% inflation target

5-5.5% growth target

1,5001,5501,6001,6501,7001,7501,8001,8501,900

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Stocks off peak, 10Y bond yield ease

KL Comp Index(right)

10Y bond(%, left)


Philippine peso

The peso heading for a new record low in 1-2 years

• Although it comes as no surprise that the Philippine peso is depreciating for a sixth consecutive year, there is a need to be vigilant against signs of overheating in its economy. The door has opened for the peso to fall, over the next couple of years, to 56, its weakeest level against the US dollar seen (in 2004-05).

• High growth in the Philippines is now accompanied by twin (current account and budget) deficits. Overseas foreign worker (OFW) remittances, a traditional support for the peso, have been overtaken by record-wide trade deficits. This has increased the peso’s weakness to higher US rates and a stronger US dollar. The peso has already depreciated 4.4% in the first two months of this year, which is large compared to the full-year depreciation of 5.4% and 4.7% in 2016 and 2017, respectively.

• Inflation is set to stay above the central bank’s target this year. At its monetary policy meeting on 8 February, Bangko Sentral ng Pilipinas (BSP) raised its inflation forecast to 4.3% from 3.4% in 2018, above its 2-4% target range. Believing that the higher inflation this year will be transitory because of tax reforms, as well as higher food and energy prices, BSP expects inflation to return lower to 3.5% in 2019.

• Contrary to expectations, BSP did not hike rates on 8 February. Instead, BSP announced, a week later, a reduction in the banks’ reserve requirement ratio (RRR) by one percentage point to 19%. This will take effect from 2 March and is estimated to inject less than PHP 100bn in additional liquidity.

• Given the twin deficits and higher inflation outlook, we expect the BSP to eventually hike rates every quarter into 2Q19. This will help temper the depreciation pressure on the peso from the three Fed hikes we expect this year.

• The International Monetary Fund (IMF) warned last November that credit gaps in the country could approach ‘warning’ levels in 2017-18. Close attention should be paid to the increased leverage of some conglomerates and property developers, as well the expansion in shadow banking activities.


USD/PHP 2018 52.6 53.3 54.0 54.42019 54.8 55.2 55.6 56.0

Policy rate 2018 3.25 3.50 3.75 4.00% 2019 4.25 4.50 4.50 4.50

10Y bond 2018 6.50 6.60 6.70 6.80% 2019 6.90 7.00 7.00 7.00

2015 2016 2017 2018 2019Real GDP 5.9 6.9 6.7 6.7 6.7

CPI 1.4 1.8 3.2 3.6 3.8Curr a/c 2.5 0.2 -0.7 -1.1 -1.3Budget -0.9 -3.4 -2.4 -2.5 -2.5

% YoY for GDP & CPI, % of GDP for Budget & current account


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9 Mar: 52.063USD/PHP

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Overseas foreign worker (OFW) remittances

Tradedeficit

Trade deficit overtakes OFW remittancesUS$bn, 12M rolling sum

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BSP o/n reverse repo rate, % pa

CPI, % YoYCore inflation% YoY

Rate hikes are coming on higher inflation


Singapore dollar

The SGD has weakened against its basket

• A downward correction in the Sing dollar’s year-long appreciation is due. After the unexpected spike in global market volatility in early February, the Sing dollar nominal effective exchange rate (SGD NEER) has fallen below the strongest quartile of its neutral policy band. Historically, this has been associated with a recovery in the US dollar against the currencies of Singapore’s major trading partners.

• The lower SGD NEER was also consistent with the moderation in GDP growth to 3.6% YoY in 4Q17 from its four-year high of 5.5% in 3Q17, as well as a CPI inflation rate below its official forecast.

• With 2018 growth seen at 3%, and inflation to pick up in 2H18, Singapore is expected to return to a mild appreciation stance this year. Hence, the downside in the SGD NEER should be limited to around the mid-point of its policy band.

• Conditions are coming together for the SGD NEER policy to exit its neutral stance this year. The economic recovery has broadened from the external sector to domestic demand. In turn, labour market conditions have improved. For example, the seasonally-adjusted resident unemployment rate returned below 3% again in 4Q17.

• Unless inflation surprises on the upside, the odds remain for the appreciation policy to return in October instead of April. CPI-All Items inflation has been below its official 0.5-1.5% forecast range in five out of last six months ending January. Core inflation was 1.4% YoY in January, below the mid-point of the official 1-2% target for a second straight month.

• When the neutral stance ends, don’t expect a return to the traditional 2% annual appreciation pace for the SGD NEER policy band like in 2004 or 2010. Average economic growth has been, and is expected to remain, below pre-crisis levels. For now, the slope of the SGD NEER policy band is only expected to return to a mild appreciation pace of 0.5% a year.


USD/SGD 2018 1.32 1.35 1.38 1.372019 1.37 1.36 1.36 1.35

3mth SOR 2018 1.40 1.65 1.90 2.15% 2019 2.15 2.40 2.40 2.65

10Y bond 2018 2.55 2.60 2.65 2.70% 2019 2.75 2.80 2.80 2.80

2015 2016 2017 2018 2019Real GDP 2.0 2.0 3.6 3.0 2.7

CPI -0.5 -0.5 0.6 1.0 1.8Curr a/c 18.1 19.0 18.8 18.9 20.0Budget 0.6 -1.2 1.2 1.5 1.8



1.301.321.341.361.381.401.421.441.46

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9 Mar: 1.3166USD/SGD

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DBS SGD NEER has fallen below its highest quartileIndexed: 7-11 Apr 2014=100

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Real GDP(% YoY, left)

CPI inflation(% YoY, right)

Singapore's post-crisis growth moderates

Appreciation stance


South Korean won

The currency is not as won-derful as in 2017

• In 2017, the Korean won appreciated 13% vs the US dollar to become the second best-performing G20 currency. In 4Q17 alone, the won rallied 7.3% on a convergence of positive factors. Real GDP growth surprised at a 3.5-year high of 3.8% YoY in 3Q17. CPI inflation rose to a five-year high of 2.6% YoY in August. The Bank of Korea (BOK) lifted its policy rate for the first time in six years, above its US counterpart on 30 November.

• The Korean won is unlikely to repeat last year’s stellar performance. As of 23 February, the won was at 1,079, a tad weaker than the 1,067 level it ended 2017 at. We expect the won to return more gains over the next six months as the Fed hikes lift and keep the US policy rate above its Korean counterpart this year.

• There is no urgency for the BOK to keep pace with Fed hikes this year. Real GDP growth slowed to 3% YoY in 4Q17 and has scope to moderate further with exports and investment. For example, the Korea Institute for Industrial Economics & Trade has projected growth in semiconductor exports to moderate to 18.6% in 2018 from 60.2% last year.

• Private consumption will be constrained by record high household debt. Economic activity, however, will be supported by the Moon government’s income-led growth policies and ambitious fiscal spending plan.

• Both CPI and core inflation slipped to around 1% YoY in January, below the official 2% target, but also the 1.50% policy rate. Inflation is likely to stay subdued in 1H18 before moving higher again in 2H18.

• The BOK will also need to monitor external risks. Two main risks will come from the US this year i.e. a step-up in trade protectionism ahead of the mid-term elections, and a faster pace of US rate increases. Geopolitical risks will continue to revolve around North Korea. Unlike last year, US-NK relations have been less about sabre-rattling this year, and hopefully more about moving towards diplomatic negotiations to resolve the nuclear crisis.


USD/KRW 2018 1,082 1,121 1,160 1,1482019 1,136 1,124 1,112 1,100

Policy rate 2018 1.50 1.75 1.75 2.00% 2019 2.00 2.25 2.25 2.25

10Y bond 2018 2.65 2.70 2.75 2.80% 2019 2.82 2.84 2.86 2.88

2015 2016 2017 2018 2019Real GDP 2.8 2.8 3.0 2.9 2.9



Budget is net fiscal balance


1,050

1,100

1,150

1,200

1,250

1050

1100

1150

1200

1250


9 Mar: 1070USD/KRW

1,8001,9002,0002,1002,2002,3002,4002,5002,6002,700

1.00

1.50

2.00

2.50

3.00


KOSPI tumbles, KR bond yields holding up for now

KOSPI(right)

10Y KR bond(%, left)

0

1

2

3

4

14 15 16 17 18

Real GDP, % YoY

2% inflation target

Core inflation% YoY

Growth/inflation outlook is not as strong as before

CPI, % YoY

BOK policy rate, %


Thai baht

No encore to last year’s solid performance

• Investor confidence remains high in Thailand as evidenced by the resilience of its financial markets during the brief global market volatility in early February. Unlike most of its peers, Thailand’s growth is accompanied by robust current account surpluses and fiscal consolidation. Hence, it should not come as a surprise that the Thai baht has been the strongest Asian currency this year. As of 26 February, the baht has appreciated 4% vs the US dollar. This is on top of the 10% gain that made the baht the third-best performer in 2017.

• Historically, the baht has never repeated or surpassed its strong performance for a second straight year. This year is unlikely to be any different. In contrast to 2017, the US dollar is oversold with potential to recover on more Fed hikes driven by a stronger US growth/inflation outlook this year.

• The next Fed hike in March will push the US policy rate above its Thai counterpart. For 2018, we see three Fed hikes and none by the Bank of Thailand (BOT). The Finance Ministry has upgraded its 2018 growth outlook to 4.2% from 3.8% on the assumption that the policy rate remains steady at 1.50% throughout the year.

• Thailand has been experiencing “growth optimism without inflation”. After moving out of deflation in 2016, CPI inflation has not been able to rise above the BOT policy rate, even as real GDP growth pushed above the BOT’s 1-4% inflation target in 3Q17. Looking ahead, we expect Thailand’s growth to remain strong around 4%, with inflation averaging around 1.5% in 2018-19. Hence, we expect the BOT to refrain from rate hikes this year and to start normalising rates only in 2019.

• Unlike in the past couple of years, Thailand’s current account surplus will narrow to less than 10% of GDP amidst a wider fiscal deficit this year. This, coupled with policy measures to encourage overseas direct investment and a stronger US dollar in the region, should help the baht reverse some of its strong gains over the past year.


USD/THB 2018 31.8 32.8 33.9 33.62019 33.3 33.1 32.8 32.5

Policy rate 2018 1.50 1.50 1.50 1.50% 2019 1.75 2.00 2.25 2.50

10Y bond 2018 2.40 2.40 2.45 2.50% 2019 2.60 2.70 2.80 2.80

2015 2016 2017 2018 2019Real GDP 2.9 3.3 3.9 4.0 4.0

CPI -0.9 0.2 0.7 1.5 1.5Curr a/c 8.1 11.9 10.1 8.7 7.5Budget -2.9 -2.6 -1.2 -1.5 -2.0



31

32

33

34

35

36

37

31

32

33

34

35

36

37


9 Mar: 31.328USD/THB

50% Fibonacciretracement

range

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

1.50

1.75

2.00

2.25

2.50

2.75

3.00

3.25


Thai stocks and bonds hold on to gains

SET Index(right)

10Y TH bond(%, left)

-2

-1

0

1

2

3

4

5

14 15 16 17 18

Real GDP, % YoY

BOT 1D repo rate, % pa

Thailand is experiencing "growth without inflation"

CPI, % YoY Core inflation, % YoY

1-4% inflation target


Vietnamese dong

The dong is still stable, but not as steady as last year

• The Vietnamese dong is, over the next couple of years, unlikely to be as stable as it has been in past eight months. We expect the dong to break out of its tight 22,700-22,750 range and depreciate towards and above 23,000 in 2018-19.

• We expect the US dollar to recover this year on Fed hikes supported by a stronger US growth/inflation outlook. Over the past few years, the dong has depreciated with its Asia ex Japan (AXJ) peers when the US dollar was strong, but remained stable (especially in 2017) when the greenback weakened against AXJ currencies.

• The Vietnamese economy is unlikely to repeat last year’s stellar performance. The bar to beating this year’s official 6.5-6.7% growth target is high. Robust export growth is set to moderate with global growth amidst more US-led protectionist measures. With public debt approaching the 65% constitutional limit, Vietnam needs to attract foreign investments. To this end, Vietnam intends to step up its planned divestment of hundreds of state-owned companies of around VND 5,000 tn or US$220bn (more details will be available in 2Q18). This has become more challenging this year because global equities have, since February, been struggling to rise against a more hawkish US rate outlook and a stronger US dollar. More so if the Ho Chi Minh stock index relinquishes its position as Asia’s best performer this year.

• To achieve this year’s growth target, the State Bank of Vietnam (SBV) is targeting 17% credit growth in 2018 after bank lending increased 18.2% in 2017. Moody’s has been encouraged by the meaningful progress in resolving problem assets in the banking sector. Fitch recently upgraded the ratings of three Vietnamese lenders. We also noted that high growth has not been accompanied by sharply higher inflation and widening trade deficits.

• Still, Vietnam should guard against complacency, especially when investor confidence is strong. Moody’s has cautioned against more monetary accommodation to support headline growth at the expense of macroeconomic stability. The World Bank was wary that rapid credit expansion could encourage excessive risk-taking and worsen asset quality over the longer term.


USD/VND 2018 22,745 22,832 22,920 22,9702019 23,020 23,069 23,120 23,170

Policy rate 2018 6.25 6.25 6.25 6.25% 2019 6.50 6.50 6.75 6.75

2015 2016 2017 2018 2019Real GDP 6.7 6.2 6.8 6.4 6.6

CPI 0.6 4.7 2.6 3.6 3.8Curr a/c -0.1 4.1 1.3 3.2 4.0Budget -5.0 5.0 -3.5 -3.7 -3.5



0.85

0.90

0.95

1.00

1.05

21000

21500

22000

22500

23000


USD/VND 9 Mar: 22762

USD/AXJ (right)

USD/VND(left)

01234567

-6,000

-4,000

-2,000

0

2,000

4,000

15 16 17 18

Trade balance (left)

CPI (right)

% YoY

GDP growth higher, inflation lower, trade deficit narrowUS$mn, 12M rolling sum

Real GDP (right)

4005006007008009001,0001,1001,200

4.004.505.005.506.006.507.007.508.00


Best stock market, and possibly bond market, in Asia

Ho Chi Minh stock index(right)

10Y bond(%, left)


Australian dollar

Negative rate differential to weigh on the Oz

• The Australian dollar has been in a new and higher 0.74-0.81 trading range against the US dollar since June 2017, in line with Australia’s better growth performance and outlook. Having hit the ceiling in January, the Oz has been, and is expected to keep retreating towards the floor of this range.

• The Oz has started to lose its rate-differential advantage to the greenback. The AU 10Y bond yield has, for the first time since mid-2000, fallen below its US counterpart since 21 February. The next US rate hike in March will lift the Fed Funds Rate above the Reserve Bank of Australia (RBA) cash rate; both policty rates are currently at 1.50%. We expect three Fed hikes in 2018, followed by another two increases in 2019. Even if growth exceeds 3% over the next year, the RBA has no intention to follow other central banks in raising rates this year. The Oz depreciated the last time AU rates fell below that of the the USD’s in the late 1990s.

• The RBA has set a high bar to raise rates. A couple of things need to happen before the RBA is convinced that inflation is on track to move above the mid-point of its 2-3% target. First, the RBA needs more progress in the labour market towards full employment. Second, businesses need to increase wages.

• The RBA has estimated that the non-accelerating inflation rate of unemployment (NAIRU) has declined to 5% in 2017 from 6% in 2003, and has left the door open for more downward revisions. Until then, it expects the jobless rate to stabilise at around 5.25% into 2020. The RBA is also comfortable with its projection for underlying inflation to reach 1.75% by end-2018 and 2% by end-2019.

• Unlike in 2017, the Oz will not be supported by a trade surplus this year. The good and services balance posted a A$1.36bn deficit in December, its widest since October 2016. A slowdown in China and Japan, with whom Australia has the largest surpluses, will not be welcome. More than half of the country’s exports head to Asia. In this regard, the Oz is likely to depreciate with its Asian counterparts.


AUD/USD 2018 0.78 0.76 0.74 0.752019 0.76 0.76 0.77 0.78

Policy rate 2018 1.50 1.50 1.55 1.65% 2019 1.80 1.90 2.05 2.20

10Y bond 2018 2.85 2.93 3.01 3.06% 2019 3.16 3.32 3.39 3.45

2015 2016 2017 2018 2019Real GDP 2.5 2.6 2.3 2.8 2.8



DBS forecasts in red, Bloomberg consensus in blue

Historical data in black

0.65

0.70

0.75

0.80

0.85

0.65

0.70

0.75

0.80

0.85


9 Mar: 0.7844AUD/USD

0

1

2

3

4

5

09 10 11 12 13 14 15 16 17 18

Australia's growth without inflation

RBA cash rate, % pa

Real GDP, % YoY

CPI, % YoY

4.5

5.0

5.5

6.0

6.5

0

1

2

3

4

5

09 10 11 12 13 14 15 16 17 18

RBA hike needs full employment & wage growth

RBA cash rate(% pa, left)

Jobless rate(%, right)

Wage growth(% YoY, left)


British pound

Pounded by Fed hikes and Brexit uncertainties

• The British pound could not sustain its recovery above its psychological 1.40 level against the US dollar. Sterling is likely to spend the rest of year in a lower 1.35-1.40 range with downside risks.

• Sterling will depreciate with a weaker euro. The sterling’s appreciation since the start of 2017 has been in line with the rise of the euro, the largest component in the DXY. We believe that the euro has started to retreat from the ceiling of its new and higher “pre-normalisation” range between 1.15 and 1.25. With the Eurozone, and not the US, now experiencing “growth without inflation”, the Fed is now increasingly seen to be well ahead of its EU counterpart in normalising monetary policy.

• The Bank of England (BOE) is expected to deliver a “dovish hike” this year, possibly in May. CPI inflation is no longer surging towards 3% as it did into the BOE hike last November. While the UK’s key inflation gauges have stabilised around their peaks, they have to retreat lower. With the pound having appreciated back to around its Brexit referendum levels and Brexit uncertainties keeping the UK’s growth outlook below 2%, the BOE expects inflation to eventually fall back towards its official 2% target over the next two years. According to its latest inflation report, the BOE is looking at “one hike per year” over the next three years. Clearly, UK rate hike expectations pale against the prospect for 3-4 Fed hikes this year.

• According to the Commodity Futures Trading Commission (CFTC) Commitment of Traders report, speculators have turned net long on sterling since 4Q. Appetite for the dollar weakened as global reflation trades picked up momentum with the synchronised world recovery. Sterling also drew support from the BOE’s hike last November. When this year started, some EU leaders gave false hope for negotiations with the UK to move towards a “soft Brexit”. Over the past month, the UK and Brussels remain divided on a myriad of issues that could lead to a “hard Brexit” or “no deal”. The immediate risk to the pound is a failure to agree on the terms of UK’s Brexit transition period by the end-March deadline.


GBP/USD 2018 1.39 1.37 1.35 1.372019 1.38 1.40 1.41 1.43

Policy rate 2018 0.50 0.65 0.70 0.80% 2019 0.90 1.00 1.10 1.20

10Y bond 2018 1.50 1.60 1.70 1.80% 2019 1.92 2.09 2.15 2.20

2015 2016 2017 2018 2019Real GDP 2.3 1.9 1.8 1.5 1.5



DBS forecasts in red, Bloomberg consensus in blue

Historical data in black

1.201.251.301.351.401.451.501.551.60

1.201.251.301.351.401.451.501.551.60


9 Mar: 1.3850GBP/USD

-1

0

1

2

3

4

5

14 15 16 17 18

Real GDPBOE base rate

CPI

UK inflation gauges have yet to come off their highs% YoY, % pa

RPI-X

-120-100

-80-60-40-20

02040


Speculators are exposed if Brexit shifts towards an unfavourable outcome

thousands of CFTC contracts

Non-commercialnet long GBP positions


Euro

A pre-normalisation range forms around 1.15-1.25

• The euro is likely to have found a “pre-normalisation” trading range between 1.15 and 1.25 vs the US dollar. This is above the 1.05-1.15 band seen after the ECB launched its QE programme in March 2015. The new and higher range is consistent with the Eurozone’s better growth performance and improved economic outlook.

• There are reasons to believe that the euro will retreat from the top of this new 1.15-1.25 range over the next six months. According to the Commitment of Traders report by theCFTC, speculators have been hesitant to add to their record long euro positions this year.

• Unlike 2017, it is the Eurozone, and not America, that is experiencing “growth without inflation” this year. CPI inflation retreated further from its official 2% target to 1.2% YoY in February, it lowest level since December 2016. While real GDP growth remained high at 2.7% YoY in 4Q, it did slow for the first time in five quarters. As growth moderates further in the quarters ahead, it should help dampen speculation for the ECB to bring forward monetary policy normalisation.

• The base case remains for the ECB to end its asset-purchase programme (APP) in September. Unless the euro extends its appreciation to 1.30, the ECB is unlikely to extend its APP to December. The ECB’s stance remains unchanged for a hike to come only well after APP ends. The Fed delivered its first rate hike 14 months after it ended QE. Understandably, ECB staff has projected the 3M Euribor to turn positive only in 2020.

• Don’t expect the same upside surprises for growth and politics like last year. Eurozone growth is set to moderate in the quarters ahead. German Chancellor Angela Merkel has finally formed a grand coalition but she and her allies have been weakened by the process. An increase in euroscepticism was evident at the Italian elections on 4 March, but this was more about voters rejecting establishment parties than about exiting the EU.


EUR/USD 2018 1.23 1.19 1.16 1.172019 1.19 1.20 1.22 1.23

Policy rate 2018 0 0 0 0% 2019 0 0 0 0

10Y bond 2018 0.70 0.80 0.90 1.00% 2019 1.13 1.25 1.38 1.50

2015 2016 2017 2018 2019Real GDP 2.1 1.8 2.5 2.2 2.2




1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.00

1.05

1.10

1.15

1.20

1.25

1.30


9 Mar: 1.2307EUR/USD

QE range: 1.05-1.15

Pre-normalisationrange: 1.15-1.25

-1

0

1

2

3

14 15 16 17 18

Real GDPECB's 2% inflation target

CPI

Eurozone faces growth optimism without inflation% YoY

Core inflation

-300

-200

-100

0

100

200

05 06 07 08 09 10 11 12 13 14 15 16 17 18

Record-high speculative net long positions in EURthousands of CFTC contracts

Non-commercialnet long EUR positions


Japanese yen

Monetary divergence vs risk aversion

• It has become challenging to make a confident call on the Japanese yen. Our base case scenario sees the return of a dovish stance at the Bank of Japan (BOJ) and a more hawkish US interest rate outlook lifting USD/JPY back into its 110-115 range. Conversely, we are aware that the yen could reprise its safe-haven role if the US 10Y bond yield rises above 3% and hurts global equities including the Nikkei.

• Japan has reaffirmed its commitment to continue its quantitative and qualitative easing (QQE) with yield curve control (YCC) policies. The Abe government has, in mid-February, reappointed Haruhiko Kuroda for a second five-year term as BOJ governor. Equally important were the appointments of reflationist Mazaumi Wakatabe and “BOJ-insider” Masayoshi Amamiya as Kuroda’s deputies.

• Having pushed back speculation that it engaged in “stealth tapering”, the BOJ now holds the stance that “Japan is not yet in a situation where the BOJ can offer a plan on how and when to exit its ultra-easy policy”. The return of a dovish stance at the BOJ and a more hawkish Fed hike outlook have potential to renew monetary policy divergences and arrest this year’s appreciation in the yen. Unfortunately, as mentioned above, the odds for a flight to safety into the yen on risk aversion cannot be ruled out too.

• The odds of a policy response to address undesirable yen strength is no longer a zero probability. Chief Cabinet Secretary Yoshihide Suga and Vice-Finance Minister for international affairs Masatsugu Asaakawa have come out to warn that recent yen moves have been one-sided. The risk of intervention cannot be ruled out if USD/JPY falls to 100-102. Koichi Hamada, economic adviser to Prime Minister Shinzo Abe, has suggested that the BOJ considers buying foreign bonds if it runs out of domestic assets to purchase. Until then, the cabinet has, meanwhile, approved a tax reform plan for the coming fiscal year starting in April to provide tax incentives for Japanese companies to redirect retained earnings toward lifting wages and increasing capital investment.


USD/JPY 2018 108 112 116 1152019 114 112 111 110

Policy rate 2018 -0.10 -0.10 -0.10 -0.10% 2019 -0.10 -0.10 -0.10 -0.10

10Y bond 2018 0.08 0.09 0.10 0.10% 2019 0.10 0.10 0.10 0.10

2015 2016 2017 2018 2019Real GDP 1.4 0.9 1.6 1.1 0.9

CPI 0.8 -0.1 0.5 0.6 1.0Curr a/c 3.1 3.8 4.0 3.7 3.5Budget -6.7 -5.7 -5.0 -5.5 -5.0



95

100

105

110

115

120

125

130

95

100

105

110

115

120

125

130


9 Mar: 106.82USD/JPY

14,000

16,000

18,000

20,000

22,000

24,000

26,000

-0.50

-0.25

0.00

0.25

0.50

0.75


Nikkei tumbles on doubts over BOJ policies

Nikkei 225(right)

10Y JGB(%, left)

-2-10123456

15 16 17 18

Real GDP% QoQ saar 2%

inflation target

Japan's GDP growth slips below inflation again

CPI inflation% YoY

CPI ex Food% YoY


US dollar

Supported by the Fed’s positive outlook

• Do not underestimate the potential of three Fed hikes to support the US dollar this year. Unlike 2017, Fed hikes are no longer viewed as “dovish hikes” this year. At its Federal Open Market Committee meeting on 31 January, the Fed clearly stated that it was no longer looking for inflation to stay below, but to rise towards its 2% target this year. This has been supported by the central tendency for the US 10Y Treasury yield to gravitate towards 3%.

• The US economy is now expected to expand at/above 2.5% in 2018-19 on the Tax Cuts and Jobs Act passed last year, the two-year bipartisan budget deal signed in February, and new Fed Chairman Jerome Powell looking to encourage US banks to lend more to families and businesses. Apart from moving above its post-crisis average 2.1% growth, US growth will, more importantly, take over the lead from its G7 peers such as the Eurozone. The euro, which is the largest component of the DXY, has been bolstered over the past year by its stronger growth performance and outlook.

• Hence, we now believe the first two Fed hikes will be front-loaded by a quarter to March and June. The hike in March will take the ceiling of the Fed funds rate to above its peers in Australia, South Korea, and Thailand. The increase in June will take the ceiling to 2% which was the the level from which it first fell to tackle the subprime-led financial crisis.

• With the benchmark DXY low around 90 today, and not high above 100 a year ago, Trump has stopped complaining about a strong US dollar. Unfortunately, he has become more protectionist this year. For example, his latest proposal to impose import tariffs of 25% on steel and 10% on aluminium, while aimed at gaining leverage at the NAFTA negotiations, has potential to provoke America’s major trading partners to retaliate. There is certainly less complacency over trade war risks this year, especially ahead of the US mid-term elections in November.


DXY Index 2018 89.8 92.7 95.0 94.22019 92.9 92.0 90.7 90.0

Policy rate 2018 1.75 2.00 2.00 2.25% 2019 2.25 2.50 2.50 2.75

10Y bond 2018 2.85 2.90 2.95 3.00% 2019 3.05 3.10 3.10 3.10

2015 2016 2017 2018 2019Real GDP 2.9 1.5 2.3 2.6 2.5


% YoY for GDP & CPI (eop), % of GDP for current account & budget balance


85

90

95

100

105

85

90

95

100

105


9 Mar: 90.093DXY Index

-1

0

1

2

3

4

14 15 16 17 18

Real GDP

2% inflation target

CPI inflation

Fed expects inflation to rise in 2018% YoY

PCE core deflator

-1

0

1

2

3

4

14 15 16 17 18

US

UK

EUJP

UST10Y above 3% will be a game-changer for the USD10-year government bond yield, %


Growth, Inflation, Policy Rates & FX forecasts

GDP growth, % YoY CPI inflation, % YoY, ave

2016 2017e 2018f 2019f 2016 2017e 2018f 2019f

China 6.7 6.9 6.4 6.2 2.0 1.6 2.1 2.2Hong Kong 2.0 3.7 3.3 2.5 2.4 1.7 2.0 2.5India* 8.0 7.1 6.6 7.2 4.9 4.5 3.7 4.6Indonesia 5.0 5.1 5.3 5.4 3.5 3.8 4.0 4.5Malaysia 4.2 5.9 5.0 5.0 2.1 3.8 3.5 3.0Philippines** 6.9 6.7 6.7 6.7 1.3 2.9 4.2 3.5Singapore 2.0 3.6 3.0 2.7 -0.5 0.6 1.0 1.8South Korea 2.8 3.1 2.9 2.9 1.0 1.9 1.8 1.8Taiwan 1.4 2.9 2.8 2.4 1.4 0.6 1.0 1.0Thailand 3.2 3.9 4.0 4.0 0.2 0.7 1.5 1.5Vietnam 6.2 6.8 6.4 6.6 2.7 3.5 3.6 3.8

Eurozone 1.8 2.5 2.2 2.2 0.2 1.5 1.3 1.4Japan 0.9 1.7 1.1 0.9 -0.1 0.5 0.6 1.0United States*** 1.5 2.3 2.6 2.5 1.3 1.6 1.8 1.8* refers to year ending March ** new CPI series *** eop for CPI inflation

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19China* 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35India 6.00 6.00 6.00 6.00 6.25 6.25 6.50 6.50Indonesia 4.25 4.25 4.25 4.50 4.75 5.00 5.00 5.00Malaysia 3.25 3.25 3.50 3.50 3.50 3.50 3.50 3.50Philippines 3.25 3.50 3.75 4.00 4.25 4.50 4.50 4.50Singapore** 1.40 1.65 1.90 2.15 2.15 2.40 2.40 2.65South Korea 1.50 1.75 1.75 2.00 2.00 2.25 2.25 2.25Taiwan 1.38 1.38 1.38 1.50 1.50 1.63 1.63 1.75Thailand 1.50 1.50 1.50 1.50 1.75 2.00 2.25 2.50Vietnam*** 6.25 6.25 6.25 6.25 6.50 6.50 6.75 6.75

Eurozone 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Japan -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10United States 1.75 2.00 2.00 2.25 2.25 2.50 2.50 2.75* 1-yr lending rate; ** 3M SOR ; *** prime rate

Policy interest rates, eop

Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19China 6.39 6.49 6.60 6.56 6.52 6.48 6.44 6.40Hong Kong 7.82 7.83 7.83 7.82 7.82 7.81 7.81 7.80India 64.7 65.9 67.0 67.2 67.4 67.6 67.8 68.0Indonesia 13,596 13,747 13900 13,960 14,019 14,079 14,140 14200Malaysia 3.95 4.08 4.20 4.18 4.16 4.14 4.12 4.10Philippines 52.6 53.3 54.0 54.4 54.8 55.2 55.6 56.0Singapore 1.32 1.35 1.38 1.37 1.37 1.36 1.36 1.35South Korea 1,082 1,121 1160 1,148 1,136 1,124 1,112 1100Thailand 31.8 32.8 33.9 33.6 33.3 33.1 32.8 32.5Vietnam 22,745 22,832 22920 22,970 23,020 23,069 23,120 23170

Australia 0.78 0.76 0.74 0.75 0.76 0.76 0.77 0.78Eurozone 1.23 1.19 1.16 1.17 1.19 1.20 1.22 1.23Japan 108 112 116 115 114 112 111 110United Kingdom 1.39 1.37 1.35 1.37 1.38 1.40 1.41 1.43Australia, Eurozone and United Kingdom are direct quotes

Exchange rates, eop


Group Research Economics & Strategy

Taimur Baig, Ph.D. Chief Economist - G3 & Asia +65 6878-9548 [email protected] Gundy Cahyadi Economist - Indonesia, Thailand, & Philippines +65 6682-8760 [email protected]

Nathan Chow Strategist - China & Hong Kong +852 3668-5693 [email protected] Joanne Goh Regional equity strategist +65 6878-5233 [email protected] Eugene Leow Rates Strategist - G3 & Asia +65 6878-2842 [email protected] Chris Leung Economist - China & Hong Kong +852 3668-5694 [email protected] Ma Tieying Economist - Japan, South Korea, & Taiwan +65 6878-2408 [email protected]

Radhika Rao Economist - Eurozone & India +65 6878-5282 [email protected] Irvin Seah Economist - Singapore, Malaysia, & Vietnam +65 6878-6727 [email protected] Duncan Tan FX and Rates Strategist +65 6878-2140 [email protected]

Samuel Tse Economist - China & Hong Kong +852 3668-5694 [email protected] Philip Wee FX Strategist - G3 & Asia +65 6878-4033 [email protected]

Sources: Data for all charts and tables are from CEIC, Bloomberg and DBS Group Research (forecasts and transformations).

Disclaimer: The information herein is published by DBS Bank Ltd (the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation & the particular needs of any specific addressee. The information herein is published for the information of addressees only & is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company & its associates, their directors, officers and/or employees may have positions or other interests in, & may effect transactions in securities mentioned herein & may also perform or seek to perform broking, investment banking & other banking or financial services for these companies. The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Sources for all charts & tables are CEIC & Bloomberg unless otherwise specified. DBS Bank Ltd., 12 Marina Blvd, Marina Bay Financial Center Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.













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