Momentum Gauge Signals Risk to Southeast Asia Currency Rally
(Bloomberg) -- The blistering rally in Southeast Asian currencies versus the dollar may lose momentum as investor exuberance over a pending Federal Reserve policy pivot fades, at least according to one closely-watched gauge of momentum.
Most Read from Bloomberg
Nazi Bunker’s Leafy Makeover Turns Ugly Past Into Urban Eyecatcher
How the Corti?os of S?o Paulo Helped Shelter South America’s Largest City
The Relative Strength Index for a regional gauge — which indicates when moves look stretched — has breached 80, well above levels which a currency is typically considered overbought, data compiled by Bloomberg show. That’s after Southeast Asian currencies occupied the top four spots of regional performance rankings this month amid bets Fed rate cuts are coming in September.
DBS Group Holdings Ltd. said in a note on Tuesday that the Singapore dollar was likely to consolidate in the near term, and that it was “overbought” along with other Asian currencies.
A Bloomberg index of the Thai baht, Malaysian ringgit, Indonesian rupiah, Philippine peso and Singapore dollar has jumped more than 4% in August, its best monthly performance since at least 2015. Asian currencies have rallied across the board on Fed bets, but gains outside Southeast Asia have been smaller in comparison, and the RSI for Bloomberg’s Asia Dollar Index was at 69.
“We expect most Asian currencies to make further gains over time, even if their biggest rallies may now be behind them,” Capital Economics wrote in a note. “We think the boost from relative interest rates has probably run its course.”
Still, some of the currencies may have room to rise more than the others.
“Barring shocks to the global economy and financial markets, we think that it is appropriate to assess if Asian currencies like rupiah and Philippine peso can recover more of their 2022-23 losses like the ringgit and to a lesser extent, the baht,” Philip Wee, senior currency strategist at DBS, said.
Barclays Plc analysts said in a note that diminishing political risk in Thailand would help attract more foreign inflows, giving the baht a leg up.
--With assistance from Marcus Wong.
(Updates levels and chart)
Most Read from Bloomberg Businessweek
Far-Right ‘Terrorgram’ Chatrooms Are Fueling a Wave of Power Grid Attacks
Hong Kong’s Old Airport Becomes Symbol of City’s Property Pain
Losing Your Job Used to Be Shameful. Now It’s a Whole Identity
FOMO Frenzy Fuels Taiwan Home Prices Despite Threat of China Invasion
?2024 Bloomberg L.P.