Last updated October 10th, 2018.
Practically every currency in the world has depreciated against the US Dollar since 2016.
Some rare exceptions, such as the Swiss Franc, have outperformed the greenback. Not many can boast a stronger performance than the USD as of late though.
Asian money had a rough few years in particular. Falling commodity prices have hit oil producers such as Malaysia and Indonesia hard. Likewise, lower demand for exports worldwide weakened currencies all across emerging Asia.
However, there’s light at the end of the tunnel. Some Asian currencies are now at multi-decade lows and don’t have much room left to fall. The same can be said for the price of oil and other commodities which several currencies in the region are based upon.
Here’s three currencies in Asia which were hit hard, but are first in line to make a comeback against a weakening dollar. They probably won’t skyrocket overnight, yet should see sustained growth over the long-term.
1. Malaysian Ringgit
Malaysia’s currency has been one of the worst in Southeast Asia. Despite the country’s overall strong economy growing at over 4% per year, the ringgit is now at its lowest level in over two decades.
Part of the reason for the ringgit’s decline is because Malaysia is the world’s largest exporter of palm oil. Petroleum also plays an important role in the nation’s economy. As such, plummeting oil prices have led to weak exports.
10-year chart of the Malaysian Ringgit (MYR) compared to the USD.
There’s still hope for the ringgit though. It’s been on an uptrend against the US Dollar since early 2017 and has been one of Asia’s best performing currencies since the beginning of the year.
Now at its lowest level since the early 1990s, the Malaysian ringgit has few places left to go but upwards. We at InvestAsian were bearish on the Ringgit back in 2015 (rightfully so too).
Two years later, and after losing more than 20% of its value since then, we recommend the ringgit as a buy.
2. Chinese Yuan
President Trump has had some harsh words for China. He even threatened to label them a currency manipulator for allegedly keeping the Yuan’s value artificially low.
But the yuan has gotten stronger since December of 2016 and will continue to make gains over the long-term. Why? Because China’s goal of becoming the world’s main economic player demands a stronger, more stable currency.
The yuan must also become a widely-used global currency. A lot of progress has especially been made on this front.
10-year chart of the Chinese Yuan (CNY) compared to the USD.
Not only that, but the IMF even made the Chinese Yuan part of its basket of reserve currencies. All of these things mean greater demand for a Yuan which will inevitably strengthen over time.
3. Indian Rupee
India’s currency will also strengthen for many of the same reasons the Yuan will. The rupee has a much lower base to start from though, and it arguably has even more upside potential.
The Indian economy hasn’t achieved anywhere near China’s level of growth. Experts believe that corruption, inefficiency, high taxes, and lack of business friendliness are to blame for the country’s poor performance when compared to its peers.
10-year chart of the Indian Rupee (INR) compared to the USD.
Yet there’s better times ahead in the world’s second most populous country. Prime Minister Modi has put forth numerous reforms since his election in 2014.
Job creation, improved-business processes, and a booming Indian stock market have been hallmarks of his tenure in office.
In fact, the IMF expects India’s economy to grow even faster than China’s starting this year and going forward.
This clearly bodes well for the rupee. The nation’s sheer size combined with faster growth will lead to a more dynamic, globally-significant Indian economy – along with a stronger rupee.
More Currencies in Asia
Not all types of Asian money will appreciate. On the contrary, a few markets should be avoided at any cost.
The Indonesian Rupiah and Vietnamese Dong, for example, have steadily depreciated over the past 20 years. Vietnam and Indonesia themselves boast strong economies and great investment potential. However, their currencies show no sign of rising.
Others like the Philippine Peso and Singapore Dollar have shown relative stability over the long term. But neither of them is beaten down enough to recommend as a buying opportunity though.
Either way, Asia is a diverse region with some of the world’s best – and worst – performing currencies.
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