According to newly-released global research report of the bank, in terms of relative performance, Indonesian rupiah and Malaysian ringgit are expected to outperform and Philippine peso (PHP) to underperform. Meanwhile, the bank is relatively neutral on Singapore dollar (SGD), Thai baht (THB) and Vietnamese dong (VND).
Experts from the bank believes US policy rate differentials have bottomed out as the US Federal Reserve (Fed) has moved clearly into a pause phase. This should help return flows in favour of regional ASEAN currencies, the report said.
According to the bank, there are two factors limiting the upside. First, based on its projections, US policy rates could remain historically high versus ASEAN economies by the end of 2024. Second, ASEAN central banks may also cut rates, particularly those who had hiked partly to stave off foreign exchange (forex) weakness.
Therefore, it reckons that Malaysia, Thailand and Vietnam’s interest rate differentials will improve, while Indonesia’s rate differential against the US will remain similar to current levels, while the Philippines’ rate differential versus the US dollar will worsen in 2024.
Besides interest rate differentials, looser US financial conditions should also aid ASEAN forex. Standard Chartered sees Malaysian ringgit being potentially the largest regional beneficiary on onshore US dollar deposit positioning./.
VNA
