According to Dr. Enzio von Pfeil on CNBC Cash Flow, the main subject on all Asian Central Banks' minds will be the following: how to counter the risk of downward pressure on their currencies being dragged down by an ever-weaker dollar. In weaker Asian states, one might find a stronger demand and rising rates if yields are favorable. In the long term, expect countries such as Malaysia, Thailand and even South Korea to cut interest rates.
Hong Kong and China are different, on the other hand. Hong Kong remains pegged to the Dollar and China's fixed exchange rate has few ties with its interest rates. Funnily enough, the cuts on the other side of the world have little effect in China's currency, except for indirect effects weighing in from exports. Yet this is different for Japan; a stronger yen will pose a negative effect for Japan's exports and aggregate imported deflation.
What do you think will be China's next move in its currency?
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