BCA Research has expressed doubts about the sustainability of the recent rally in ASEAN currencies, noting that a slowdown is expected.
The research firm pointed to the lack of support from economic fundamentals, stressing that the contraction in global export orders indicates an upcoming weakness in ASEAN exports, which could lead to a decline in the value of these currencies against the US dollar.
According to BCA Research, the interest rate differential between ASEAN countries and the United States has not historically been a significant factor in the value of ASEAN currencies.
The US Federal Reserve expects the Malaysian ringgit and the Thai baht to outperform their emerging market peers during a period of reduced global risk, which is expected to happen. This outperformance is attributed to Malaysia and Thailand’s status as net creditor countries.
In contrast, BCA Research expects the Philippine peso and Indonesian rupiah to likely underperform their peers. The firm attributes this weak performance to the Philippines and Indonesia’s status as large net debtors, which could be more vulnerable in times of economic uncertainty.
The report notes that the current upward movement in the value of ASEAN currencies is temporary and does not align with the fundamental economic indicators that usually drive currency strength.
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