News overnight of the Fed's commitment to near zero rates until late 2014 and the potential for QE3 have reversed yesterdays post Chinese New Year Asian currency mini sell-off and given new impetus for an acceleration of the recent breakout. Abundant USD liquidity at near zero rates will continue to flow across the Pacific and into the growing economies that need it most. Looking at the currencies around the region, India has performed best this year, but still has significant structural headwinds. Malaysia has been the second best performer having gained 4.1% YTD followed by SGD, KRW and PHP. Indonesia has performed surprisingly poorly only gaining 1.04% YTD with almost all of that move occuring since Moody's upgraded the country to investment grade on Jan 18.
Look for Indonesia to play catch up to the higher flying MYR and SGD in an environment of overall strengthening Asian currencies. Sell USD/IDR at current levels and look to add short USD/SGD and short 1 mth USD/MYR on bounces to 1.2640 and 3.0600 respectively.
Sell USD/IDR 1 month NDF at current level (8935) with a stop loss at 9050 and a target of 8600.
Sell USD/SGD at 1.2640 with a stop-loss at 1.2730 and a target of 1.2400.Sell USD/MYR 1 month NDF at 3.0600 with a stop loss at 3.0880 and a target at 2.9800.