Why US$100 oil, 5% US yields affect Singdollar, ringgit differently vs other Asean currencies
High energy prices, elevated borrowing costs are causing a divide in regional currencies, say analysts
The US dollar has experienced a surge in 10-year Treasury yields, crossing the 5 per cent mark, while crude oil prices have surpassed the US$100 mark per barrel. These significant market movements have resulted in a noticeable divergence among regional currencies in the Association of Southeast Asian Nations (ASEAN). Singapore's Singapore dollar, Malaysia's ringgit, and Vietnam's dong have managed to hold their value relatively well against the US dollar.
This resilience can be attributed to Singapore's durable balance of payments surpluses, strong foreign direct investment inflows, and proactive monetary tightening by the Monetary Authority of Singapore. Malaysia, being a net oil and gas exporter, has benefited from higher energy prices, which have cushioned its trade surplus. On the other hand, Vietnam's dong is supported by persistent foreign direct investment and passive fund inflows.
However, the Philippines, Thailand, and Indonesia, which are heavy oil importers, are facing stronger headwinds due to their currencies being adversely affected by the rising oil prices and surging global yields. The Philippines and Thailand have experienced deteriorating current account positions, while Indonesia's rupiah has shown some stabilization due to capital inflows into debt instruments and Bank Indonesia Rupiah Securities.
Market analysts suggest that the critical factor for ASEAN economies is not whether oil has breached the US$100 mark but rather how long these elevated energy prices remain. If oil prices and US yields remain high, it could lead to greater differentiation across ASEAN currencies. Despite these currency pressures, regional central banks may have limited scope for aggressive interest rate hikes, as domestic inflation will take center stage for policymakers in the coming months.
To mitigate these challenges, sustained investment, credible policy responses, and sound fiscal management will remain crucial buffers for ASEAN economies.
Written by urgent.news from The Business Times - Companies & Markets's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
