Real, Won, Australian Dollar to Rebound From April, Nomura Says

By Kim Kyoungwha

Feb. 25 (Bloomberg) -- The South Korean won and Brazilian real will lead a rebound in emerging-market currencies from April in anticipation of an improvement in global economies, according to Nomura Holdings Inc.

“April is a possible turnaround,” Simon Flint, head of global foreign exchange research in Singapore, said at an investors’ forum in Beijing today. “From April going on, you should start to be more aggressive in taking risks.”

Brazilian real will strengthen 11 percent to 2.15 against the U.S. dollar by the end of 2009, the Korean won will rise 26 percent to 1,200 and the Australian dollar will gain 15 percent to 75 U.S. cents versus the greenback, forecasts provided by Nomura show.

All but two of 26 most-traded emerging-market currencies tracked by Bloomberg data have fallen against the dollar in the past year, led by a 41 percent tumble in the Iceland krona and a 37 percent decline in the won, as fallout from the global credit rout slowed economies and prompted investors to sell riskier assets. Policy makers have lowered borrowing costs and increased fiscal spending to shore up confidence in their economies.

Investors should pay more attention to “risky currencies” that may rally early as global economies may bottom between the second and third quarters, Flint said, citing Nomura’s leading indicators that suggest a trough in economic activity in April.

“For risky Asia like Korea and Indonesia, their currencies will start to recover when global risk environment improves which we would expect to be pronounced from April,” Flint said. A recovery in the Taiwan dollar and the Singapore dollar may follow in the third quarter as their economies are “most exposed” to global trade cycle, he added.

China’s yuan will remain stable against the U.S. currency in the next six months before resuming its appreciation against the dollar, Flint forecast.

“Beyond six months, we think it will appreciate,” he said. “China is re-orientating itself from an export-led economy to a domestic consumption-led economy. One important aspect of this will be to have a stronger currency.”

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.