A key theme for 2007 is the prospect of further interest rate cuts in South East Asia, notably in Thailand (where we now expect rates to fall to 3.75% by yearend), Indonesia and the Philippines. The common link is currency strength against the globally-weak dollar, and fading worries about inflation. In contrast, interest rates have further to rise in India and, although they have probably peaked in Korea, concerns about the strength of the housing market mean that the Bank of Korea is likely to maintain a tightening bias for some months yet.
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