Asia FX 2025 Outlook Podcast Series #3: Outperformers and Vietnam as microcosm of China+1

What the desk is arguing

MUFG identifies the PHP and INR as likely outperformers in the Asia FX space throughout 2025, driven by favorable economic fundamentals and geopolitical shifts. The discussion emphasizes a potential resurgence of protectionist policies under a new Trump administration, which could further amplify the shift of supply chains from China to Vietnam, enhancing its growth prospects and, by extension, invigorating the PHP and INR.

This perspective rejects the notion that regional currencies are poised for broad stagnation, arguing instead that targeted economic policies and shifting supply chains present unique opportunities for the PHP and INR. This analysis indicates a more nuanced understanding of regional economic interdependencies rather than a simplified outlook based on global economic trends alone.

Where it sits in our coverage

Our current consensus target for the PHP stands at 1.075 with a firm spread of 0.08, reflecting a moderately bullish view that aligns well with MUFG’s analysis. While we anticipate some volatility due to external pressures, the potential for the PHP and INR to benefit from tailored economic policies is a theme we recognize and support in our forecasts.

In comparison, here's how other firms view the PHP against the backdrop of our consensus:

• JPMorgan: Target of 1.10, suggesting a bullish stance with expectation of gradual appreciation.
• Goldman Sachs: Target of 1.08, indicating cautious optimism on the PHP’s prospects.
• HSBC: Target of 1.07, reflecting a more conservative outlook based on macroeconomic challenges.

How other firms see it

The outlook on the PHP and INR as outperformers is supported by several firms, aligning with MUFG’s sentiments. Key players like JPMorgan and Goldman Sachs echo similar bullish forecasts, suggesting a broadly positive sentiment for these currencies in 2025.

Conversely, some firms have adopted a more skeptical view of the PHP's trajectory. BofA particularly has set a lower target of 1.04, concerned about potential economic headwinds that might overshadow the optimism surrounding supply chain shifts.

• BofA: Target of 1.04, signaling a contrary stance amid potential economic slowdowns.
• Morgan Stanley: Target of 1.05, expressing caution linked to geopolitical tensions.