Asian currencies are expected to strengthen this year for the first time in three years as exchange rates already more than reflect the prospect of higher US interest rates, according to Manulife Asset Management.
The Indonesian rupiah, Indian rupee and Malaysian ringgit would lead the gains, said Endre Pedersen, a chief investment officer at the firm.
The Bloomberg-JP Morgan Asia Dollar Index, which tracks the region's 10 most-active currencies excluding the yen, sank to a four-year low last month.
"We've been seeing dollar strength, particularly against South Asia, since 2013, so that trade for us is starting to get somewhat long," Pedersen said. "We have seen long periods of sell-offs and weakness in Asian currencies. That trend might actually change this year. That is probably the biggest call we are making."
The dollar advanced against all 16 other major currencies in the past six months as signs of an improving US economy boosted the odds of a US interest rate increase while monetary authorities loosened policy in Europe, China and Japan.
Futures contracts indicate an 82.5 per cent chance the US Federal Reserve will boost its key rate to at least 0.5 per cent by the end of the year. It has been held at 0.25 per cent since December 2008.