HONG KONG/SINGAPORE, May 8 — A sharp rally in Asian currencies is set to boost demand for wealth and forex products as clients seek alternatives to United States (US) dollar-denominated assets and demand for hedging grows amid trade tariff uncertainties, said bankers and analysts.
The rally in currencies since last week, starting with the Taiwan dollar and spreading outwards to those of China, Hong Kong, Malaysia, Singapore, and South Korea, sounds a warning for the greenback and is seen as an "Asian crisis in reverse."
"Most of our clients are Asian, so if their own currency is growing, that gives them more purchasing power for wealth management products," said Singapore's biggest bank DBS Group's chief executive Tan Su Shan on Thursday.
A strong Singapore dollar would help bring a "pool of wealth" into the leading global wealth management hub, according to United Overseas Bank or UOB's chief financial officer Leong Yung Chee.
Singapore's currency has risen more than four per cent since US President Donald Trump hiked tariffs on April 2.
"We hope to benefit from that in terms of the wealth management of some businesses that we do for retail clients," he said during UOB's earnings briefing on Wednesday.
The expectations underscore how President Donald Trump's trade policies are pushing investors out of US assets and moving their money into Asia, amid growing questions about the greenback's status as a safe haven.
Analysts said a weaker dollar is expected to cloud demand for popular US fixed-income assets among wealth management clients in Asia, who may now be more open to investing in local currency-denominated assets.
The return of assets to Asia will further bolster the region's allure as a leading global wealth hub.
According to Knight Frank's 2025 Wealth Report, issued in March, Asia will account for nearly half of all new high-net-worth individuals, or those with over US$10 million (RM42.81 million) in assets, between 2025 and 2028.
Morningstar senior analyst Michael Makdad said the Asian currency swings have not yet hugely influenced investor sentiment. However, currency trends could affect flows over the long term as investments are allocated out of US assets.
In Taiwan, a substantial portion of household financial assets has traditionally been allocated to life insurance products that invest heavily in dollar assets, and a leap of eight per cent in its currency within two days sent tremors across the sector.
"If Taiwanese life insurers struggle to generate attractive returns from US fixed-income investments, it may open the door for banks to offer more alternative wealth management solutions instead," he said.
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A view of the United Overseas Bank signage in Singapore, on May 3, 2023. — Picture by REUTERS[/caption]
'Tailwind and headwinds'
Gavekal Dragonomics' deputy China research director Christopher Beddor said that Chinese exporters have accumulated a substantial amount of money in US-dollar-denominated assets previously on the expectation of the yuan getting weaker.
If currency expectations shift and the interest-rate gap narrows, there could be "a quite meaningful amount of money suddenly flowing into yuan-denominated Chinese bank accounts".
"We are not there yet, but it is in the back of the mind for many investors," he said.
The heightened volatility in currency markets is also expected to drive demand for regional banks' forex services, bankers said. However, local clients' exports are made less competitive by stronger currencies, which is a concern.
"They will provide both tailwind and headwinds. A stronger currency does affect their ability to export.
"It will affect their cost curves as well, and so the impact will depend on whether you are a net exporter or importer," said DBS's Tan.
In Japan, banks may benefit from corporate clients looking beyond usual hedging tools to reduce foreign exchange risks.
Japanese firms have generally gone for the simplest hedging strategy — selling dollars and buying yen — but the urgency of the tariff situation is prompting them to consider other derivatives, said Mitsubishi UFJ Bank's transaction banking department deputy manager Noriaki Masuda.
He said that company profitability will be affected when exchange rates fluctuate sharply, adding: "There may be cases where companies will be forced to restructure business distribution or raise prices."
— Reuters
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A logo of DBS is pictured outside an office in Singapore, on January 5, 2016. — Picture by REUTERS[/caption]
