Core Insights - The outlook for the Asia-Pacific foreign exchange market in the second half of 2025 is heavily influenced by potential trade agreements with the United States, which will determine the relative performance of Asian currencies, although the impact is expected to be temporary [2][5] - A long-term structural downtrend for the US dollar against Asian currencies is anticipated to persist, as doubts about the dollar's status may continue [2] Currency Performance Summary - The assessment of Asian currencies has been revised upward for Q2 2025 due to an earlier-than-expected decline in the US dollar, which is seen as a lasting trend [5] - Despite potential trade agreements, Asian economies are expected to face pressures, particularly in exports, which may be impacted by a rapid decline in the dollar's exchange rate against Asian currencies [5] - Central banks in Asia may need to intervene to slow the appreciation of their currencies, which could lead to tensions with the US government [5] Currency Scores - The currency scores for Q2 and Q3 2025 indicate varying expectations for different currencies against the US dollar: - CNY: -3 (Q2) to +1 (Q3) - HKD: 0 (Q2) to -1 (Q3) - KRW: -3 (Q2) to +2 (Q3) - TWD: -3 (Q2) to +3 (Q3) - SGD: -1 (Q2) to +3 (Q3) - MYR: -1 (Q2) to +1 (Q3) - THB: -2 (Q2) to +1 (Q3) - PHP: -1 (Q2) to +2 (Q3) - INR: -2 (Q2) to +2 (Q3) - IDR: -2 (Q2) to +2 (Q3) - VND: -3 (Q2) to +2 (Q3) [6] Trade Agreement Implications - A potential trade agreement between the US and China may not fully eliminate tariffs, which could continue to pressure the Chinese yuan [9] - The timing of any trade agreement will significantly influence the upward movement of Asian currencies, with China's situation likely benefiting Northeast Asian currencies more [9] Geopolitical Context - President Trump's threats regarding tariffs on countries aligning with BRICS nations reflect concerns over the dollar's status, potentially leading to further depreciation of the dollar [7] - The perception of threats to the dollar may prompt policy adjustments from the Trump administration, despite calls for a weaker dollar [7]