June is shaping up to be a good month for Southeast Asia’s currencies, with every one gaining, according to Bloomberg.
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.
Peso
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.
Baht
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.
Read more at Bloomberg