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Bank of America’s Tan Says Asian Currencies Will Weaken in 2012

Christy Tan, a foreign-exchange strategist at Bank of America Merrill Lynch in Singapore, comments on the outlook for Asian currencies in a research note released today.

The bank predicts the Singapore dollar will weaken 1.5 percent to 1.22 per dollar by the end of September 2012. It also sees Malaysia’s ringgit dropping 1 percent to 3.00 and the Taiwan dollar falling 3.7 percent to NT$30.00.

“Our economists are expecting lower-than-consensus non-oil exports growth for Singapore, firmer headline inflation in Malaysia accompanied by growth moderation in the second quarter, and a more pessimistic outcome for export orders in Taiwan. All these will likely mean that Singapore, Taiwan, and possibly Malaysia, could steer toward growth-supporting policies.

‘‘Our Asian currency forecasts reflect cautious optimism for the rest of this year and potentially a weaker trend next year. The pressure for currency appreciation to ward off inflation will likely take a backseat. Further Singapore dollar strength will likely draw its source from safe-haven inflows instead of a concerted policy push.

‘‘We expect a greater risk of continued Taiwanese dollar underperformance toward the end of the year, in view of sustained equity outflows.’’

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