Asia Business Outlook - 2H 2025

Asia FX Landscape: Shifting Tides Amid Global Dynamics Key Themes:

• Resurgence of Asian Currencies: Investor sentiment has turned bullish on Asian currencies, particularly the Taiwanese dollar and Philippine peso, amid easing U.S.-China trade tensions and new regional trade agreements. The Chinese yuan has also seen increased long positions, reaching their highest since October 2024.

• Divergent Central Bank Policies: While the U.S. Federal Reserve maintains a higher-for-longer stance, several Asian central banks, including those in the Philippines and Indonesia, have initiated rate cuts to support domestic growth. This divergence is influencing capital flows and currency valuations across the region. 

• Impact of U.S. Dollar Dynamics: The U.S. dollar's recent volatility, partly due to domestic policy uncertainties and legal challenges to proposed tariffs, has led investors to reconsider their exposure to dollar assets, potentially benefiting Asian currencies. 

FX Strategy Implications:

• Selective Positioning: Focus on currencies with strong fundamentals and supportive policy environments, such as the Indian rupee and Philippine peso.

• Hedging Considerations: Given the dollar's volatility, consider dynamic hedging strategies to manage currency risk in portfolios with significant U.S. dollar exposure.

Asia Credit & Volatility: Navigating Opportunities and Risks

Credit Market Highlights:

• Robust Inflows: Asian bonds attracted significant foreign investment in April 2025, marking the largest monthly inflow in eight months, driven by investors seeking high-yield, stable markets amid global volatility. 

• Improving Credit Cycle: Earnings reports from Asian corporates indicate resilient fundamentals, with stable leverage and decent liquidity. The Asia high yield default rate fell significantly to 9.1% in the first half of 2024 and is expected to normalize to the mid-single-digit range. 

• Policy Risks: Uncertainties surrounding U.S. trade policies, including potential tariffs, pose risks to export-centric Asian economies, potentially impacting credit conditions and investor sentiment. 

Volatility Considerations:

• Market Volatility: Geopolitical tensions and policy uncertainties are contributing to increased market volatility, necessitating vigilant risk management and the use of volatility instruments to hedge exposures.

CV Strategy Implications:

• Credit Selection: Prioritize investment-grade credits with strong fundamentals, particularly in sectors like Indian infrastructure and Chinese utilities.

• Volatility Instruments: Utilize options and other derivatives to manage exposure to market volatility, especially in currencies and sectors susceptible to policy shifts.

Strategic Positioning: Navigating the 2H 2025 Landscape

FX Strategies:

• Dynamic Allocation: Adjust currency exposures in response to evolving macroeconomic indicators and central bank policies, with a focus on currencies poised for appreciation.

• Risk Management: Implement robust risk management frameworks to navigate currency volatility and protect portfolio value.

Credit & Volatility Strategies:

• Diversified Credit Exposure: Maintain a diversified credit portfolio, balancing high-yield opportunities with investment-grade stability.

• Volatility Hedging: Incorporate volatility hedging strategies to mitigate risks associated with geopolitical and policy-driven market fluctuations.

Market Indicators Snapshot

Currency Pair	Current Rate	6M Forecast	12M Forecast
USD/CNY	7.29	7.33	7.39
USD/INR	87.00	88.00	89.00
USD/SGD	1.35	1.37	1.35
USD/IDR	16,000	16,200	16,400
USD/THB	36.00	36.50	37.00

Note: Rates are indicative and subject to market fluctuations.

Conclusion: Embracing Agility in Uncertain Times

The second half of 2025 presents a complex landscape for Asia's FX and CV markets, characterized by policy divergences, geopolitical tensions, and shifting investor sentiments. Success in this environment will hinge on agility, informed decision-making, and proactive risk management.

Saichild remains committed to providing strategic insights and tailored solutions to navigate these challenges and capitalize on emerging opportunities.