The strengthening dollar isn’t automatically good news for Asia.
The dollar has gained 13.2 per cent over the past six months, but this won’t be the fillip many Asian economies might hope it is, argues Frederic Neumann at HSBC:
It’s tempting to think that sliding currencies have restored Asia’s competitiveness, setting us up for a nice bounce in growth.
But forget the easy equation of exports becoming more competitive he says, and focus on the broader picture:
[W]hile most Asian currencies have weakened against the dollar, many have held up far better against the yen and the euro. Competitiveness, in short, hasn’t improved as much as a glance at dollar exchange rates might suggest.
The most helpful measure is actually the real effective exchange rate, which measures the value of an exporter’s currency against that of all major markets and that of competitors. And as the chart below illustrates, this tells a rather different story. >> Read More