Tick, you have previously advised clients to sell dollar rallies and diversify. Do you stand by that position?

In the near term, the dollar can stay stronger for longer due to strong momentum and Fed hawkishness. But we still encourage clients to use current dollar strength to diversify exposure out of the USD on a medium to longer term basis. The pivot point for dollar strength to roll over should be visible closer to the 3-6 month mark when core PCE and inflation pressure rolls over. Current market pricing for the Fed to hike by close to two hikes looks overpriced to us.

Do you feel the Fed might not necessarily lift rates in 2026?

That is our view. There is a high hurdle to raise rates. Even one hike is very closely debated among FOMC members, let alone the two hikes the market is looking for. Inflation expectations implied by breakevens are well under control.

What are your expectations around intervention in USD/JPY and its effectiveness?

For every passing day USD/JPY hovers at current levels, it questions the real sensitivity of the Ministry of Finance. In 2024, USD/JPY hovered above 160 for 12-13 trading days. We are about a week and a half above the comfort level now. I wouldn't dismiss intervention risk—possibly into next week's holiday-shortened US week when liquidity is thin. History shows intervention can be painful: in the last few instances near 160, USD/JPY fell 5-6 big figures in a couple of days.

Is tightening from the BOJ the only realistic path to yen strength? How do you see the BOJ acting for the rest of 2026?

I wouldn't say BOJ hiking rates would be the solution to stemming yen weakness. BOJ tends to be very conservative and behind the curve. They are not the main driver of turning USD/JPY around. What we need for USD/JPY to stabilize and roll over is repricing from the Fed side—when the market prices in no hikes or even an easing bias over the next 12 months, that would matter more than BOJ hiking.

If the Fed does not lift rates, which EM currencies have the most upside?

Within Asia, stick to the more stable currencies—not necessarily those hurt most by Fed repricing. The Philippine peso and TWD could see relief if Fed pricing eases, but near-term the dollar could be stronger for longer. Safer bets: Chinese yuan (clear policy guidance, only Asian currency holding up on a 3-month basis), Australian dollar (offers value at current levels), and Singapore dollar (steady, MAS expected to maintain hawkish bias).

Is there a difference between rhetoric and actual benefits of yuan weakness? The PBOC seems comfortable with a weaker yuan.

There is a balance. Given domestic weakness in parts of the economy, good exports are not unwelcome. What is driving CNY stronger is not officials pulling it stronger—they are quietly allowing natural forces to gravitate toward a lower USD/CNY. Exporters are converting dollar proceeds into local currency at a run rate of about $50 billion/month. Confidence around export resilience is encouraging conversion, and the yuan is being allowed to follow via the central bank fixing mechanism.

Why is the tech boom in Taiwan not translating into currency strength for the Taiwan dollar?

Currency resilience is masked by the strong dollar. On a relative basis, the Taiwan dollar is an average performer—down about 3.5% over 3 months, in line with the average. The strong dollar is keeping powerful trade surpluses from translating into currency strength for TWD and KRW. KRW has an additional issue of single stock concentration rebalancing. TWD doesn't have that because TSMC's rally hasn't been as extreme as SK Hynix/Samsung. Over 6-12 months, once dollar strength fades, the Taiwan dollar can deliver about 3-4% upside.