Global investment firm Jefferies has issued a bullish outlook on Asian currencies. As the U.S. dollar shows signs of sustained weakening, Jefferies analysts say this is the right time to buy Asian currencies for long-term investors. The firm believes that macroeconomic shifts, trade balance dynamics, and stronger monetary policies in Asia are building a solid case.
In this blog post, we explore the 5 key reasons why Jefferies recommends to buy Asian currencies, especially in the current environment.
1. Buy Asian Currencies: U.S. Dollar Weakness Is Structural
Jefferies emphasizes that the recent decline in the U.S. dollar is not just cyclical but potentially structural. Rising fiscal deficits, cooling U.S. inflation, and the expectation that the Federal Reserve may slow interest rate hikes are combining to pressure the dollar.
As the greenback loses its safe-haven edge, Jefferies believes the shift is durable—supporting the argument to buy Asian currencies as a strong hedge for global investors.
2. Asian Central Banks Maintain Policy Stability
Another compelling reason to buy Asian currencies is the steady hand of Asia’s central banks. Countries like India, Indonesia, and South Korea have maintained cautious but proactive monetary policies.
This policy consistency has resulted in greater confidence among investors. With inflation largely under control in key Asian economies, local currencies are being seen as safe and stable stores of value.
3. Trade Surpluses Strengthen Asian Currencies
Jefferies also highlights that most Asian economies are running trade surpluses or have significantly reduced deficits. For example, India’s current account deficit has narrowed sharply, while China and Vietnam continue to post strong exports.
These trade dynamics naturally generate demand for regional currencies, providing fundamental support. For long-term investors, this makes the case to buy Asian currencies even more attractive.
4. Stronger FX Reserves in Asia Provide Safety Net
Asian economies have bolstered their foreign exchange reserves over the past decade. According to Jefferies, this acts as a cushion against currency volatility and potential outflows.
Countries like India, China, and Thailand have built strong FX reserves, giving them firepower to defend their currencies in times of stress. This sovereign buffer provides additional comfort to investors looking to buy Asian currencies.
5. Valuations of Asian Currencies Still Attractive
Despite recent gains, many Asian currencies are still undervalued when compared to historical averages. The Indian Rupee, Korean Won, and Malaysian Ringgit, for instance, trade below their long-term real effective exchange rate (REER).
Jefferies analysts note this valuation gap as a solid reason to buy Asian currencies. They argue that patient investors could see real appreciation as the global cycle pivots away from dollar dominance.
What Does This Mean for Indian Investors?
For Indian HNIs and retail investors with global exposure or plans to travel, invest, or study abroad, the Jefferies call to buy Asian currencies is significant. Diversifying into stronger regional currencies could offer portfolio insulation and better purchasing power in the future.
In particular, with the Indian Rupee supported by strong forex reserves, narrowing deficits, and resilient GDP growth, the macro environment looks stable.
Expert Opinion From Jefferies
In their note titled “Asia FX: The Long-Term Play,” Jefferies’ global strategist Sean Darby wrote, “The weakening dollar is a signal to revisit Asia-focused FX baskets. Investors should accumulate positions in INR, KRW, SGD and THB with long-term risk-adjusted expectations.”
This expert endorsement further solidifies the rationale to buy Asian currencies while market conditions remain favorable.
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