ANZ - "When the US dollar strengthens against major currencies, USD/Asia typically follows suit. However, this correlation has broken down in recent weeks. Despite the broad based strength in the US dollar, as measured by the DXY Index, USD/Asia has stayed relatively steady. Since early February, the DXY has risen by 4.2% but USD/Asia has only seen a marginal 0.1% increase.
In our view, the reason for the correlation breakdown is the positive performance of global equities, reflecting strong risk appetite. As much as USD/Asia tracks the US dollar, the growth outlook as proxied by equities is equally important. Normally, rising regional equity markets should have driven USD/Asia lower. At the moment, USD/Asia is caught in a stalemate between the two opposing forces of a strong US dollar and positive equity performance.
(...) We retain our constructive view on Asian currencies. We are currently long KRW, CNY & CNH, PHP, INR; and short IDR, SGD."