As central banks begin to swing into tightening mode, attention in Asia is turning to how currencies will perform. One area of focus is the 10 states that make up the Association of Southeast Asian Nations (Asean).
The fact that almost half of the Asean currencies – Lao kip, Vietnamese dong, Cambodian riel, Myanmar kyat – are not freely tradeable means regional analysis tends to focus on the Indonesian rupiah (IDR), Malaysian ringgit (MYR), Philippine peso (PHP), Singapore dollar (SGD) and Thai baht (THB).
The obvious factor influencing IDR, MYR, PHP, SGD and THB – commonly referred to as the Asean-5 – is Federal Reserve strategy. As BNY Mellon Markets senior market strategist for Apac Chong Wee Khoon notes, US policy tightening and the overall withdrawal of liquidity in the financial system are likely to exert negative pressure on emerging markets.
Abbas Keshvani, emerging markets FX analyst at JPMorgan, says the region’s sensitivity to the US is a continuing factor.
