By Chris Oliver, MarketWatch
HONG KONG (MarketWatch) -- Asian currencies could be about to break their long-standing link to the global industrial cycle and transform into good safe havens if the world economy heads for a new major slowdown, according to some analysts.
Detail of a 1,000 New Taiwan Dollar note
The [People's Bank of China] wants to show the market that the new yuan exchange rate is genuinely flexible and more market-driven than the previous framework," Standard Chartered analysts said Thursday in a note co-authored by Shanghai-based head of research for Greater China, Stephen Green.
The strengthening yuan, they added, is "medium-term bullish" for Asian currencies by supporting widening interest-rate spreads with the U.S. dollar that attract capital inflows to the region.
As long as China manages to sidestep a serious economic slump, the region should ride out the coming storm with relative ease. China's economy will grow about 8% in 2011, easing from around 10% this year, according to the Standard Chartered forecasts.
"Global purchasing manager's indexes have peaked and will head lower in the second half," said Standard Chartered.
South Korea's won and Taiwan's dollar will be among those to lead Asian currencies higher against the U.S. dollar, starting from the fourth quarter, they said. The Malaysian ringgit, Indonesian rupiah and Singapore dollar were also seen as currencies that would benefit the most from a rising yuan.
The bank forecast that all major currencies in the region, apart from the Vietnamese dong, will be higher against the U.S. dollar by the fourth quarter of 2011, although the survey also excluded the Japanese yen, the New Zealand and Australian dollars and a few other units.
Chris Oliver is MarketWatch's Hong Kong bureau chief.
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