According to a note by Bank of America Merrill Lynch strategists Claudio Piron and Adarsh Sinha
YTD performance of Asian currencies vs the US dollar
They expect Asian currencies to weaken in the next few months as there could be a final bout of dollar strength - on the back of widening cyclical and inflation divergence between the US and the rest of the world. This had led them to scale back on MYR and THB bullishness, according to the report.
They also argue that US 10-year yields are less relevant for Asia than the level of term premium as reflected in a steeper yield curve. However, they see FX valuations as "more-or-less fair" suggesting that there is limited room for any exaggerated moves.
The report singles out the CNY as an exception though, saying that they estimate the currency to be 12.6% overvalued vs the greenback. "Deterioration in growth and inflation, coupled with policies to reengage capital outflows will drive CNY weakness", they argue.
Well, I still believe that yields are an important factor that plays against Asian markets. With US real yields mostly positive across the curve, it's hard to look past that as you can't get such a thing anywhere else in Europe, UK or Japan. And that is a good selling point for investors to rebalance their portfolio allocation.