Page 19 - 2Q2021 RETAIL WEALTH ADVISORY Playbook

Currency Outlook

Theme 1: Fade Dollar Strength Selectively
 We expect the current USD bounce to be moderate and temporary.
 We have calibrated some of our non-USD forecasts lower, particularly Asian FX, taking into
account some outside reaction to the run-up in US Treasury yields and paring back optimism
surrounding US-Sino relations and global vaccination progress.
 The rise in US Treasury yields, if sustained, will result in wider yield differentials against other
negative-yielding DM FX (JPY, EUR and CHF), which could depreciate more than commodity-linked
currency such as AUD, NZD and CAD.
 If the pace of increase in US Treasury yields reduces, the strength in USD could fade gradually.

Theme 2: Find Opportunities to Lean Against USDAxJ Selectively
 We prefer to take the opportunity to buy the dips of CNH, MYR and KRW against the USD.
 FTSE Russell’s decision to phase in Chinese Government Bonds over 36 months is almost complete,
and the run-up of the greenback against CNH appears stretched.
 We maintain a positive outlook on MYR. FTSE will remove Malaysia from its watch list, which
bodes well for MYR going forward as this reduces the headwind for MGS. Other supports could
come largely from the global economic recovery, even as sentiments are a tad more cautious
towards late 1Q on concerns of stretched equity valuations and fast-rising UST yields.

Theme 3: Remain Bullish on Commodity-linked Currencies
 We maintain the medium-term outlook for our commodity-linked currencies as we remain more or
less sanguine on global growth recovery.
 The recent decline in NZD and AUD present better entry points for accumulation.
 Domestically, better Covid-19 management in New Zealand and Australia positioned both
countries well to ease international borders.
 For CAD, we remain bullish as crude oil outlook remains constructive, strong fiscal support, and
the acceleration of mass inoculation should translate to Canada's stronger economic outcome.

Source: Maybank Group Wealth Management Research, Maybank Kim Eng.

Recommended Action

For investors looking to get exposure into investments denominated in a different currency than their
base currency, we would advocate investors to select hedged class of their base currency whenever
applicable (e.g. investors holding MYR to select MYR-hedged Class). The action can mitigate most of the
currency translation risk from the underlying securities’ base currency (e.g. USD). Alternatively,
investors may also select their desired currency class to reflect their views of the currency. However,
any currency movement against the investors can potentially worsen the return of the underlying
investments.

18 | P a g e