Chinese yuan, South Korean won 'likely to do better than regional peers in 2014'

Northeast Asian currencies, particularly the Chinese yuan and South Korean won, are likely to outperform their regional rivals next year.

That's according to experts from the Bank of Tokyo-Mitsubishi UFJ (BTMU).

The Asean head of global markets research at BTMU, Ms Leong Sook Mei, said that part of the region is expected to see stronger economic growth and in turn, their currencies will strengthen.

The Chinese yuan is forecast to get support from continued economic expansion of more than 7 per cent in 2014, while South Korea's strong shipbuilding industry and high current account surplus may put the won at relatively loftier levels.

Apart from the Singapore dollar, which is a safer bet, Ms Leong advises that investors stay away from other Asian currencies such as the Indian rupee and the Indonesian rupiah, on concerns over their current account deficits.

Another currency that could surprise on the upside next year is the British pound.

Mr Derek Halpenny, BTMU's European head of global markets research, said the British economy has seen an upturn, with lower inflation helping to boost real incomes, a move that could give confidence to the pound.

With all eyes on the US economy, Mr Halpenny said the US Fed could start tapering its monetary stimulus programme in the first quarter next year.

Coupled with the improvement of US economic data, the greenback may be stronger against major currencies including the euro and the yen, he said.

"We're beginning to enter a period where the US economy is going to do better. It was a big fiscal drag on the US economy this year. The fiscal drag next year is going to be less than this year," Mr Halpenny added.