Asian currencies face volatility from threat of US downgrade

As US politicians take posturing to new levels, we ask Deutsche Bank's Dennis Tan about what it means for foreign exchange markets.
Dennis Tan, Deutsche Bank
Dennis Tan, Deutsche Bank

How do concerns about the US debt ceiling and the possibility of more quantitative easing affect Asian currencies
A US debt ceiling deal should be positive for global risk sentiment. Given that the US dollar is the primary funding currency for risk trades, however, any bounce in the US dollar after the deal will probably be short-lived, and we are likely to see the dollar quickly resume its downtrend alongside a rally in global equities. Asian currencies should strengthen against the US dollar in this scenario. 

If, however, a deal cannot be reached before the August 2 deadline, or is too small in size to prevent a...

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