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Every Southeast Asian Currency Gained in June — But They Can’t Catch Philippine Peso

David Finnerty
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Every Southeast Asian Currency Gained in June — But They Can’t Catch Philippine Peso

(Bloomberg) -- June is shaping up to be a good month for Southeast Asia’s currencies, with every one gaining.

The rebound is narrowing coronavirus-induced losses sustained by just about every foreign exchange in the region this year. While the Indonesian rupiah, Thai baht and Malaysian ringgit all showed improvement, the Philippine peso is by far the best-performing currency in 2020 with its 1% gain.

The rupiah, which has surged 15% this quarter, may be positioned to challenge the peso given strong foreign demand for the nation’s debt. Here’s a closer look at the main factors influencing the region’s FXs in the second half.


The peso’s outperformance is partially due to an improving current account, with imports in April down by the most since 2009 as the nation was under lockdown.

However, it is facing growing headwinds from declining oversees remittances. Bangko Sentral ng Pilipinas has also signaled concern over the appreciation by intervening to stop further gains. Investors will be awaiting guidance on the currency from BSP’s policy meeting on Thursday. The central bank is expected to keep rates unchanged after slashing rates by 125 basis points this year.


Foreign funds have returned for local debt, attracted by the second-highest yields in Asia, after selling about $9.5 billion of government bonds in February and March. There have just been $996 million of inflows since then, indicating potential for further rupiah gains.

Bank Indonesia still considers the currency as undervalued amid low inflation in Southeast Asia’s largest economy, and expectations that the current account deficit will narrow to 1.5% this year. However, near-term gains maybe limited as the central bank cut its key rate by 25 basis points last week, opening the door for further easing.


The Thai baht rose 5.8% this quarter, narrowing the year’s loss to 3.4%. The nation’s current account surplus has given it a boost, but it’s dwindling in the absence of tourism revenues in the lockdown. However, rising gold prices have provided some support for the bullion trading hub.

Headwinds to baht’s further gains are likely to come from the Bank of Thailand. It warned this month it’s ready to take steps to ensure the currency’s strength doesn’t hurt the economy. Investors will be monitoring the Wednesday policy meeting, where it’s widely expected to keep its key rate unchanged at 0.5%, to see there are currency-related measures.

Singapore Dollar

The Monetary Authority of Singapore manages the currency against major trading partners as a policy tool, rather than using interest rates like other central banks. While the nation’s relaxation of virus-related curbs last week is positive for the local currency, data on Tuesday is forecast to show core inflation has deteriorated further in May.

That’s likely to support the MAS’ current stance of allowing for a weaker currency to spur the trade-reliant economy. The Singapore dollar is down more than 3% this year.


Volatile oil prices and political turmoil have weighed on the ringgit, leaving it at the bottom of the region’s currency rankings so far this year. After falling more than 5% in the first three months, it’s barely up 1% in the second quarter. The ringgit may struggle given FTSE Russell has kept Malaysia on a watchlist for possible exclusion from its World Government Bond Index.

Inflation data on Wednesday is expected to provide cues on Malaysia’s economy and any disappointment could set the stage for additional rate cuts.

Below are the key Asian economic data and events due this week:

Monday, June 22: RBA’s Lowe on panel, New Zealand credit card spending, China 1-year and 5-year loan prime rate, South Korea 20-day export/importTuesday, June 23: Japan PMI’s and machine tool orders, South Korea PPI, Singapore CPIWednesday, June 24: Australia skilled vacancies, RBNZ rate decision, Bank of Japan summary of opinions, China 1Q BoP current account balance, Malaysia CPI, Thailand customs, trade balance and Bank of Thailand rate decisionThursday, June 25: Australia job vacancies, New Zealand trade balance, Japan all industry activity index, Bangko Sentral ng Pilipinas rate decisionFriday, June 26: New Zealand consumer confidence, Tokyo CPI, South Korea consumer confidence, Singapore industrial production

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