US dollar to gain against emerging market currencies - Clear Currency

London (Jan 28)  Irish companies doing business in Asia should start to trade directly in local currencies rather than incurring additional fees trading through the US dollar, according to a research note issued by Clear Currency.

In its ‘Asia Currency Outlook 2014’, Clear Currency argues that the US dollar is expected to gain against emerging market currencies this year as the US Federal Reserve tapers its quantitative easing programme.

Trading directly in Asian currencies like the Chinese Remenbi or Japanese Yen avoids costs associated with an additional step of changing euros for US Dollars, furthermore companies in Asia will often give discounts to trading partners can settle in local currency.

Peter O’Flanagan, head of trading at Clear Currency, said: “Traditionally Irish businesses trading in Asia would buy and sell goods in US dollars.

“However with it set to appreciate in 2014, even against the euro, this may become an expensive way of doing business. An HSBC survey in China outlined that more than half (53pc) of Chinese businesses surveyed would offer a discount of up to 5pc for transaction settled in Renminbi, and this is something we’ve experienced throughout the Asia region.

“An Irish business changing €50,000 per month into Asian currencies could save itself as much as €30,000 per year by starting to trade directly in local currency.”

In its forecasts for 2014 Clear Currency expects the euro to gain in value against the Japanese yen, Indian Rupee and Thai Baht next year, but to lose ground against China’s Renminbi.