Standard Chartered: Asia is showing a trend of "re-dollarization" with the dollar rising by as much as 8% this year | Lianhe Zaobao

Based on the strong performance of the U.S. economy and expectations that the Federal Reserve may not cut interest rates this year, Standard Chartered Bank predicts that the dollar may appreciate by 5% to 8% this year, while Asian currencies may weaken. Eric Robertson, Global Head of Research and Chief Analyst at Standard Chartered Bank, presented the contrary view of a strengthening dollar during a media roundtable on Thursday (January 15) and pointed out that discussions in the market about de-dollarization and selling off dollar assets have been exaggerated. Divya Devesh, Co-Head of Asia and ASEAN Foreign Exchange Research at Standard Chartered Bank, added that the current Asian market is showing a trend of "re-dollarization," and correspondingly, Asian currencies are expected to perform weakly this year for multiple reasons. The first is the interest rate differential. Since the Federal Reserve significantly raised interest rates three and a half years ago, the dollar has offered higher returns compared to most Asian currencies, making exporters more inclined to hold dollars rather than convert to local currencies. Even with strong exports, it is difficult for Asian currencies to strengthen. Additionally, although the development of artificial intelligence (AI) is beneficial for regional economies and foreign direct investment, it may not have a positive effect on currencies. A large influx of retail and institutional investors in Asia into U.S. tech stocks has led to capital outflows, putting pressure on local currencies. At the same time, institutional investors tend to hedge foreign exchange assets to lock in profits, and when the dollar stabilizes, these hedges are lifted, which also suppresses the appreciation of Asian currencies. The Renminbi May Be an Exception He believes that the Renminbi may be an exception, with the dollar to Renminbi exchange rate potentially falling to 6.85 by the end of the year. "It still has a considerable trade surplus, and the interest rate differential is narrowing. In recent months, the midpoint of the dollar to Renminbi exchange rate has generally declined, which I think is also favorable for the Renminbi." Regarding global monetary policy, Robertson believes that the Federal Reserve is unlikely to cut interest rates further in 2026. Even if Trump exerts pressure and may appoint a new Federal Reserve chairman, he believes that "based on economic growth and inflation prospects, the Federal Reserve has no need to cut rates." Further Reading The dollar records its largest annual decline in eight years, and the Federal Reserve is expected to continue cutting rates [DBS suggests hedging the dollar, Asian currencies are undervalued ![](https://dss0.zbstatic5.com/s3fs-public/styles/article_small_crop/public/articles/2026/01/13/2026-01-12T174045Z908309483RC2MJS9ZUKSRRTRMADP3DBS-CURRENCY_1.JPG? He also stated that the era of loose monetary policy in most parts of Asia has come to an end. Last year, there were over 150 central bank interest rate cuts globally, the highest level since the financial crisis, leading to excess liquidity. Therefore, if the government wants to continue supporting economic growth, it will shift from monetary policy to fiscal stimulus. This means an increase in debt issuance, which may trigger a rise in long-term interest rates and a steeper yield curve, thus bringing risks related to debt sustainability. Standard Chartered Bank's Chief Economist for ASEAN and South Asia, Li Weiguo, pointed out that the interest rate cut cycle in ASEAN is nearing its end, with Indonesia, Thailand, and the Philippines likely to have small rate cuts remaining, but these too are about to conclude. Singapore may become the first country to tighten its policy, with an expected increase of 50 basis points in the nominal effective exchange rate (S$NEER) policy slope in April. Li Weiguo explained that Singapore's economy grew nearly 5% last year, and although it is slowing this year, it remains above potential levels, trade risks have eased, and overall and core inflation are close to the Monetary Authority of Singapore's expected upper limit. Moreover, the two rounds of easing in the first half of last year were precautionary measures, so the Monetary Authority is likely to "retract" these easing measures. Looking ahead at the ASEAN economy, Li Weiguo believes that countries primarily driven by domestic demand, such as Indonesia and the Philippines, performed poorly last year mainly due to ineffective fiscal policy execution. Economic improvement is expected this year, but significant growth is not anticipated. Export-oriented economies like Vietnam, Thailand, Malaysia, and Singapore exceeded expectations last year, but a certain correction is expected this year due to factors including the waning effect of early shipments, the possibility that demand for artificial intelligence (AI) may not sustain last year's strong momentum, and a weakening impetus for monetary easing. He expects the overall economic growth rate in ASEAN to decline from 4.8% last year to 4.7%. He also noted that the Chinese economy still faces challenges, not only due to the continued weakness in the real estate market but also significant declines in infrastructure and manufacturing investment. The economic growth rate is expected to drop from 4.9% to 4.6% this year