Time to Take Money Off Table for Emerging-Market Bulls, LGT Says

(Bloomberg) -- The rally in emerging Asian currencies may be on its last legs.

The prospect of slowing growth in China and U.S. tax reform boosting the dollar are both poised to weigh on regional currencies over the next few months, according to LGT Bank AG. At the same time, one of the key drivers of recent gains -- the prospect of higher domestic interest rates -- is already largely priced in.

“All these factors will come into play in the next three to six months, so I think there should be some payback,” said Roy Teo, a currency strategist at LGT Bank in Singapore. “If you have some profits, there’s no harm in taking some money off the table.”

The pace of overseas buying of Indonesia and South Korea bonds has slowed in recent months as China’s deleveraging campaign damps a vital growth source for the region. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most active currencies, is finding it hard to make further headway after reaching a two-year high in September.

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