Key News & Comment (Asian block currencies)

China may raise interest rates in the second quarter and economic growth could reach 9.5 percent this year, the China Securities Journal reported on Wednesday, citing central bank advisor Li Daokui. (Reuters)

Comment: It is about time China hikes rates. With inflation likely bubbling, and growth smoking, a hike by China would be no surprise. We have been expecting the same from central banks across Asia given their relatively high growth and low interest rates. A move on rates coupled with China letting its currency move higher (albeit much less than it should) should lead the way for continued strength in Asian block currencies ex- Japan. This is why we continue to like pairing the Asian block currencies, which are extremely undervalued, against the Euro block currencies, which we believe are still overvalued.