Dollar-denominated investments will continue to be in high demand as the greenback strengthens further against major currencies amid the US Federal Reserve’s hawkish stance, according to Asia United Bank (AUB).
“The US Federal Reserve has made it clear it is on a path of sustained rate hikes. Until it is convinced that the threat of runaway inflation is completely eradicated, the dollar will remain elevated and reach historic highs,” said Antonio Agcaoili, executive vice president and head of treasury of AUB.
Andrew Chua, AUB senior vice president and head of trust, said local investors in search of higher-yielding assets will be in a good position to load up on US dollar assets.
The bank said it is already seeing pent-up demand for its AUB Gold Dollar Fund (GDF), which offers retail investors access to the US dollar bond market normally reserved for foreigners and high net worth investors.
“With expectations for interest rates to continue to rise in the near term, the GDF’s net asset value will remain depressed. However, as prospects for a US economic recession rise, we expect the US Fed to end its hawkish policies soon. This, in turn, will result in a more stable interest rate environment and will allow the fund to accrue at high yields. As such, we see the current situation as a good opportunity for our clients to start accumulating investments in the GDF and expect to reap the benefits from their investments over the next two to three years,” Chua said.
