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US dollar continues to strengthen against ASEAN currencies

by ChemOrbis Editorial Team -
  • 18/08/2015 (12:18)
Players in Southeast Asia report that the US dollar continues to strengthen against local currencies throughout the region, several of which have fallen to their lowest levels since the Asian financial crisis of 1998. Currencies throughout the region are facing the possibility of capital outflows ahead of a possible rate hike from the US Federal Reserve, rumors of which have already reduced investment flow to major emerging markets throughout the world.

According to media reports, the Malaysian ringgit has posted the steepest fall of any currency among Asian emerging markets, falling approximately 23% against the dollar to reach the lowest levels seen since 1998, breaching the 4 ringgit per dollar threshold. Weaker oil prices have directly impacted the oil producing country while the recent devaluation of the Chinese yuan also put some downward pressure on the currency.

Nearby Indonesia has seen the second steepest currency decline among emerging Asian markets, falling more than 9% during 2015 to sink to more than 13,800 rupiah to the dollar. The currency continued to weaken even after the government mandated that almost all local transactions must be completed in rupiah in a bid to shore up the currency.

In Vietnam, the central bank doubled the size of the dong/dollar trading band in an effort to compensate for the Chinese central bank’s decision to devalue the yuan. The bank now allows the dong to trade within 2% of the mid-point, established by the bank at 21,673 dong per dollar on May 7 after the bank devalued the currency by 1%. Following the bank’s move, the dong sank to a record low of around 22,040 to the dollar.

In Thailand, the baht sank to its lowest level since April 2009 at around 35.64 to the dollar following a deadly bombing at a Bangkok religious site, which some analysts believe could negatively affect tourism revenues. Analysts commented that the Thai economy is vulnerable as domestic demand and exports both weakened in the second quarter.

The Philippines has also seen its currency weaken to the lowest level in five years as the peso broke below 46 to the dollar last week shortly after the Chinese Central Bank’s decision to devalue the yuan. However, central bank officials commented that the peso has been one of strongest currencies in the region this year while adding that they are confident that strong macroeconomic fundamentals will provide some support to the peso.
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