Barclays: Slower pace of Federal Reserve interest rate cuts may put greater pressure on Asian currencies.

Barclays Bank strategist Zhang Meng pointed out that the Federal Reserve's 25 basis point rate cut in November met market expectations, but uncertainty has increased over whether there will be further cuts in December. The slowing pace of interest rate cuts by the Federal Reserve may put greater pressure on Asian currencies, especially for Asian central banks that rely on Federal Reserve policy guidance. Despite the Fed's rate cuts, Asian currencies still face depreciation pressure due to the strength of the US dollar. These central banks may have to delay their rate cut plans, leading to the need for larger rate cuts in the future to address economic conditions. Barclays Bank's expectations are consistent with previous ones, that is, if Trump wins the election, China will launch larger stimulus measures to offset potential negative impacts. These larger stimulus measures may be announced at the National People's Congress in March next year. However, unlike when Trump was elected last time, the market is now more familiar with his governing style. In terms of the economic structures of the US and China, the current inflation level in the US is higher than it was back then, while China has stronger industrial structure capacity. Therefore, it is expected that the market will respond more calmly to the measures taken by Trump after his reelection. After the US election, the Indian Rupee performed below expectations for two reasons: firstly, since September, some stock market funds have flowed out; secondly, on the eve of the US election, investors tended to adopt low-risk investment strategies. The Japanese Yen has been more affected by Trump's policies: since October, investors have started carry trades; on the other hand, the outcome of the Japanese election was not as expected, weakening expectations for hawkish policies and thus weakening support for the Yen. Barclays' US macroeconomic research team recently raised their forecasts for US inflation levels for 2025 to 2026 and lowered their GDP growth forecasts. In addition, they expect the Fed to cut rates only twice in 2025, in March and June. After the dust settles from the US election, investors adopting a wait-and-see attitude have caused the US dollar to weaken, but with the slower pace of Fed rate cuts, the long-term decline in the dollar index is also expected to slow down. December is peak period for Chinese companies' foreign exchange settlements, so the US dollar generally experiences seasonal depreciation. However, with the rise in risk aversion after Trump took office, investors may choose to hoard dollars, leading to an increase in demand for the US dollar in December. Therefore, the amount of US dollars exchanged for Chinese Yuan in December may decrease compared to before, plus some companies may have already settled their foreign exchange in September, which may provide some support for the Yuan, but the impact is limited. In the medium to long term, the stimulus measures announced on November 8th are expected to support the fundamental of the Yuan. However, the actions Trump may take in terms of tariffs and other measures after taking office may push up the US dollar, and it is expected that the Yuan will slowly weaken.