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00:00[CC may contain inaccuracies] Asian currencies have had a torrid quarter the worst quarter since the Asian financial crisis in 1997. Well well they look better in the quarter ahead. So on a quarterly basis. All right. Linda was quarter for some time yet but the interesting price action in that since the middle of May. Asian currencies as best reference from the Asian dollar index that's actually not met a new low. It was actually holding up above the May low levels. So I think you have gotten to this point that a lot of it priced in especially with regards to global recession risk. And you have also gotten to a point where even as Fed officials are increasing their hawkish rhetoric the dollar on a broader basis is not making for the group. Right. So I think if things were to stabilize especially with regards to the receding of recession concerns Asian currencies are poised to recover over the next six to 12 months. How much a recovery can we expect in that you want it stabilizing right now but there's still a divergence in terms of monetary policy between the PMC and the Fed. Will that mean for the weakness or where will support come from. Yeah I think it's interesting on on the on the U.N. side. This is a central bank as it mentioned that is on a easing bias. And as we have noted before the market is not rewarding central banks with easing ISIS. And the most pertinent observation is the Bank of Japan. So I think I would really put the keep you'll see the same category as the Bank of Japan in terms of where these 10 dovish versus hawkish. So that would essentially also mean that you shouldn't expect too much upside potential. The Chinese Shery Ahn yes it is stabilizing because of the reopening dynamics. So it is a mitigation of downside risk. But just from a central bank tight budgets perspective actually the currency should actually be been pretty weak against the US dollar. What about ultimately the the end just mentioned is the worst performing major currency down about 15 percent so far this year in the path of least resistance seems to be to the downside. But is there a flaw in your view the Bank of Japan has not shown not so bad. The floor is sort. That is the unfortunate part. It can all culminate in to a tipping point where for example the pressure on the KGB market to get too excessive and the Bank of Japan is forced to intervene and absorb too much. KGB to the extent that it causes liquidity issues that we have seen actually in the past week that they would be forced to cave in if it goes to the capping of KGB. You know I think actually the pressure point is not so much from the currency side but the GDP market could be pushed into a corner where they are unable or unwilling to do to expand our balance sheet and thereby letting the cap go and then driving that reaction back in the yen. So I think the the point of reckoning would actually come first from the GDP bucket. Yeah I want a move just to another currency which is often seen as the haven and it is the Swiss franc. I mean you've got some several trades on this seeing it getting stronger it doesn't occur to you that it is trading more and more like the old deutschmark than ever never. The Swiss franc is a currency that everybody likes. In times of crisis I think that that's the beauty of the current value proposition. And you Covid. That's a from a central bank that is favoring currency appreciation because it is obviously preferring currency strength to mitigate inflation. No inflation in Switzerland is the level of 3 percent that does it is considered uncomfortable. Right. So I think you are getting a lot of tailwind for the Swiss franc be it as the risk off hedge against uncertain times. B from a central bank that is looking to unwind the tremendous balance sheet that he has accumulated even pledging to be like Frank if the if the franc is too weak. So it actually makes a very good proposition. And we are targeting that the franc to easily gain by 3 to 5 percent over the next 12 months. Just quickly before we let you go the rupee at a new time low. We have Goldman Sachs saying that you know what. We'll get to 80 a dollar in about three months. What are your thoughts. You know when it comes to the rupee it has a structural trend of depreciation at least in nominal terms. So that is roughly where we are targeting. So we're targeting about 70 950 over six months. And the fact is that the current account dynamics is very worrisome. Even though Dell were able to buy discounted oil from Russia if you look at the current account it is heading towards a three to five percent in a situation where the Fed is still hawkish. And that is just a recipe for a weaker fundamental currencies like the rupee to be under pressure. So I think it is actually very easily attainable.

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Tailwind for Swiss Franc Seen, UBS Wealth Management Says

Teck Leng Tan, executive director of Asia Pacific foreign exchange and macro strategist at UBS Wealth Management, discusses the outlook for Asian currencies and the Swiss franc. He speaks with Haslinda Amin and Rishaad Salamat on "Bloomberg Markets: Asia." (Source: Bloomberg)

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