Seoul: The prospect of a resumption in US-China trade talks is rejuvenating emerging Asian currencies, but analysts warn that gains may fade before the day is out.
The rally could be cut short as traders take risk off the table before the Federal Reserve’s policy decision, and doubts persist that Beijing and Washington would be able to overcome their differences anytime soon.
“It is difficult to say the sentiment has improved dramatically just because the two leaders decided to meet,” said Min Gyeong-won, an economist at Woori Bank in Seoul. “It won’t be too late to take on a position after the summit.”
Regional currencies strengthened Wednesday, led by South Korea’s won, after Presidents Donald Trump and Xi Jinping agreed to restart trade talks at the G-20 summit next week. Investors cheered the move, regarding it as a step toward removing one of the biggest risks to the global growth outlook.
KB Securities Co. warns that volatility will rise in the run-up to the Fed decision and the planned meeting between Xi and Trump. Still, any decline in regional currencies will be limited as “expectations on the G-20 summit aren’t big,” said Kim Doo-un, an economist at KB Securities in Seoul.