25 September 2015 FX Forecasts and Valuations: Don't throw in the towel RMB devaluation and ongoing weakness in China's economy has also again energized the debate about whether the peg is suitable for the Hong Kong monetary and financial system. We however, remain of the view that the peg will stay in place for foreseeable future, and that re-pegging HKD to a basket of currencies, such as Singapore's FX system, or to the RMB are not viable options for the foreseeable future. India India remains an EM adjustment role model with big strides in C/A improvement, reserve accumulation, and real rates. RBI has kept the door open to further easing. FDI trends are constructive. INR should be comparatively less exposed to China contagion. The main risks come from domestic disappointments, should there be 'under-delivery' on anticipated reforms and/or poor performance in state elections, given offshore positioning in the asset markets remains large. Indonesia A stubborn current account deficit, large foreign liabilities and limited policy space leave the IDR biased towards more weakness. Arguably, Bank Indonesia is already running a relatively tight policy, resisting the temptation to cut rates in the face of slower growth, but the appetite to raise rates from here will be more questionable. With recent drawdowns in reserves raising the question of adequacy again, policymakers appear to be broadening their tool-kit: USD deposit mobilization from banks, macroprudential measures mandating use of IDR, and reductions in domestic individuals' outflow limits. We think IDR will continue to slip lower in the weeks ahead. Korea We think the KRW has more room to weaken in response to the shifts in Chinese FX policy, given the high beta to the RMB and related competitiveness concerns. The poor domestic outlook in Korea should also bias policymakers to more actively seek a weaker currency and looser monetary conditions. Over the past few months, the authorities have