BCA Research expressed skepticism about the sustainability of the recent rally in ASEAN currencies and indicated that a downturn is expected.
Pointing to the lack of support from economic fundamentals, the research house emphasized that shrinking global export orders indicate an impending weakness in ASEAN exports, which would lead to a depreciation of these currencies against the US dollar.
According to BCA Research, the policy rate differential between ASEAN countries and the United States has historically not been a significant factor in the value of ASEAN currencies.
BCA predicts that the Malaysian ringgit and the Thai baht will outperform their emerging market counterparts during a global risk period that is expected to occur. This outperformance is attributed to the status of Malaysia and Thailand as net creditor countries.
Conversely, BCA Research expects that the Philippine peso and Indonesian rupiah are likely to underperform compared to their peers. The company attributes this underperformance to the position of the Philippines and Indonesia as large net debtor countries, which could be more vulnerable in times of economic uncertainty.
The report implies that the current upward movement in the value of ASEAN currencies is temporary and not in line with the fundamental economic indicators that usually determine the strength of currencies.
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