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Biden's win could boost Asian currencies

The presidential election in the United States is approaching. In the next few weeks, the current president Donald Trump will fight for the post of the most powerful man on the planet with his democratic counterpart Joe Biden. Both presidents have a different vision and approach towards the future of the United States and their policies might affect not only US markets but also those of Asia and Europe. And it’s some of the Asian countries that currently have unhealthy relations with the US due to Trump, and should Biden come to power, he will try to change that. 
 

Return to international agreements

In the past, Biden reiterated his sympathy towards the countries in the Asian region and towards international agreements that were repealed by Trump. Immediately after taking office, Trump withdrew US membership in the Trans-Pacific Partnership (TPP), a multilateral regional free trade and cooperation agreement between member states. So far, it includes Japan, Brunei, Malaysia, Vietnam, Singapore, Australia, New Zealand, Canada, Mexico, Chile and Peru. The election of Biden could be supported by the covid-19 vaccine, which would support economic recovery worldwide and also in high-risk areas. 

Under Biden's leadership, US foreign policy will be much more predictable. According to UBS, most Asian currencies could strengthen by 3-4% against the dollar. A Thai baht, currency that is currently under pressure due to the limited travel, could strengthen significantly. That is why Biden’s win would be an ideal combination with the advent of the vaccine. Because Trump's win would not help Asian currencies that much, but the vaccine alone would support currencies by 1-2%. The Chinese yuan is a whole different story, as it cannot be expected that Biden would want to continue the trade war in China and a new team of negotiators would take place at the negotiating table under the Biden administration.


Chart: Weekly USDSGD (Source: cTrader PurpleTrading)

Growth of Asian stocks

Biden's victory would help not only Asian currencies but also Asian stocks. Recently, the Trump administration ordered US pension funds to suspend their investments in Chinese stocks. Tensions between the two countries during the pandemic, therefore, intensified even more. However, Trump's ferocity may be missed, as he himself has repeatedly pointed out the to the unfair conduct of China and other Asian countries, which he has tried to fight so far.
 

Chart: Current development of main asian currencies (Source: Bloomberg.com)

 

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