Value of ASEAN currencies not supported by fundamentals, says BCA By Investing.com

BCA Research has expressed skepticism about the sustainability of the recent rally in ASEAN currencies, indicating that a decline is expected.

The research firm highlighted the lack of support from economic fundamentals, pointing out that the decline in global export orders suggests future weakness in ASEAN exports, which would lead to a depreciation of these currencies against the US dollar.

According to BCA Research, the difference in monetary policy rates between ASEAN countries and the United States has historically not been a significant factor in the value of ASEAN currencies.

BCA predicts that during a period of global risk reduction, which is expected to occur, the Malaysian ringgit and Thai baht will outperform their emerging market counterparts. This outperformance is attributed to Malaysia and Thailand’s status as net creditor nations.

Conversely, BCA Research anticipates that the Philippine peso and Indonesian rupiah will likely underperform relative to their peers. The firm attributes this poor performance to the positions of the Philippines and Indonesia as large net debtor nations, which could be more vulnerable in times of economic uncertainty.

The report suggests that the current upward movement in the value of ASEAN currencies is temporary and out of alignment with the fundamental economic indicators that typically determine currency strength.

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