The Weakening US Dollar – Good News for Singapore

The future may be looking brighter for the Asian economies if the signs coming out of the US are anything to go by. Asia in general and Singapore especially is always going to be effected by what is going on in the economies of the world’s major players, and what happens in the US financial markets has a significant knock on effect on this side of the Pacific.

 

US Dollars

As far back as February of this year, President Trump suggested that he would be happier with a weak dollar, as that helps American companies to sell their products in foreign markets. Ironically, countries doing just this – or currency manipulation as Trump termed it – was one of his particular bug bears during his presidential campaign, citing China as the biggest offender at something that was deemed harmful to American and American companies’ interests.

 

Now Trump’s wishes seem to have come true, as analysts in the States are predicting steady but unexceptional growth rates for its economy over the next few years. What usually happens when that is the case is that the dollar subsequently weakens.

 

Bringing it back to Asia, and the weaker the American dollar (up to a point) is, the better it is for Asian economies and the Asian stock markets.  Added to that is the fact that those emerging economies are now in a better shape than just a few years ago, and are in a position to take full advantage of it. Trade is increasing in Asia with some experts expecting a 10% increase in trade over the coming 2 years.

 

There are the usual question marks over the state of the Chinese economy, especially the amount of debt it is carrying, but Ken Peng, an Asia-Pacific investment strategist, in a recent interview, stated that he thought that the question of China’s debt had been overstated, and that when taken hand in hand with the country’s assets it is no cause for concern and is actually no different from those of other developed countries.

 

Indonesia is another economy that was cited as being one to benefit, especially in light of its reform drives, however political instability ahead of its elections in 2019 may put a dampener on its ability to take full advantage.

 

Overall though, it looks like the region is in a good place to take advantage of these changes happening in the United States. In the same interview Mr Peng was confident that the state of the American economy could well turn into “a tailwind” for Asian markets.

 

One of the reasons for this is that investors will be looking to just such emerging markets to get better returns than those that they can get in developed markets.

 

 

 

 

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