SINGAPORE: Exports from India and China are the most likely to be harmed by currency strength -- or boosted by weakness -- among Asian economies, underscoring the two giant’s sensitivity to the swings of foreign exchange markets.
An analysis by Bloomberg Economics’ Tamara Henderson shows the historical link between exports and exchange rates was the highest in India in the decade through 2017, followed by China, Malaysia and Japan.
Singapore was a notable outlier -- exports actually do better when its currency firms up.
For a region that’s heavily dependent on exports, the relationship to currency performance explains why Asia’s policy makers stepped up action last year as the U.S. dollar weakened. With global trade risks rising this year as the U.S. plans tariffs on a range of products, the pressure to protect the competitiveness of export industries is set to build.
Exports from India had the strongest tie to currency performance in Asia in the past decade, suggesting the rupee’s gains tend to detract from the performance of merchandise exports while currency losses increased their appeal.
China, Japan and Malaysia also had relatively strong negative correlations, near -0.6. The average for Asia was -0.4 in the past decade. Singapore’s shipments, about half of which are re-exports, were more resilient to currency gains, Henderson said.