KUALA LUMPUR – Asean currencies are expected to appreciate further this year as global investors diversify away from heavy US exposures, said Maybank Investment Bank Bhd (Maybank IB) today.
The investment bank noted that all major Asean currencies — including the ringgit, Singapore dollar, Indonesian rupiah and Thai baht — are likely to strengthen in 2025.
“However, while this may occur, we are not yet convinced there is sufficient evidence of a real structural shift away from the US dollar,” the bank said in a research note.
Maybank IB said President Donald Trump’s protectionist stance, speculated preference for a weaker dollar, and tax proposals have contributed to recent declines in the greenback. Market volatility, which had surged across asset classes, has only recently begun to ease.
The bank said Trump’s unpredictability may continue to inject volatility into financial markets. Unlike in previous bouts of risk aversion, the US dollar has been most visibly punished, in line with the prevailing ‘Sell America’ narrative.
“We suggest continuing to sell the US dollar on rallies if the US continues to push its agenda of tariffs,” it said.
Maybank IB said even as the “Sell America” theme fades, the dollar’s downtrend could persist well into the second half of 2025, driven by a slowing US economy, expected Federal Reserve rate cuts, and the potential for global growth to exceed currently pessimistic forecasts.
“We see a possibility of a virtuous circle for Asian currencies, especially with a bearish US dollar allowing regional central banks to cut interest rates further to boost growth, which could in turn be positive for regional currencies,” it added.
The investment bank cautioned the market to watch for any signs of trade deals that could be short-term positives for the US dollar and negatives for safe havens such as gold, the Swiss franc, and, to some extent, the Singapore dollar and Thai baht, given the latter’s link to gold.
“Any bounce in the US dollar should be seen as a short-term unwinding of short positions rather than a bullish reversal to chase,” it added.
Maybank Investment Bank also noted that Asean’s efforts to reduce reliance on the US dollar remain limited.
“Adoption of local currencies for trade invoicing remains low, while central banks appear only to have engaged in some diversification of their reserves and assets.
“There have been increasing inflows into bonds, but we do not believe this is driven by Asean’s own desire to exit the US dollar or US assets,” it added. – June 2, 2025