The level of depreciation will vary across markets (Southeast Asia)

Widening trade deficits, global volatility, and aggressive hikes by the US Federal Reserve will put depreciatory pressure on Southeast Asian currencies in 2022

All currencies in Southeast Asia will depreciate in 2022, but to varying degrees. As a result, firms should expect higher import costs through H2 2022. Higher import costs will exacerbate existing cost pressures, driven by surging commodity and shipping costs. Firms should expect a high-cost environment through the rest of 2022. They should find ways to cut costs where possible, for example, by reducing supply chain inefficiencies and reducing channel costs.


Rising depreciatory pressures in 2022 will be driven by three key factors:

Surging commodity prices – Rising commodity prices are causing trade deficits across Southeast Asia to widen, as most of these countries are net commodity importers (except Indonesia). 

Global volatility – Global volatility has triggered a rush of foreign portfolio investment toward safe-haven currencies, leading to massive outflows from the emerging markets of Southeast Asia.

Monetary policy differences – The US Federal Reserve is expected to aggressively hike interest rates by a cumulative 225 basis points through 2022 compared to an average of 80 basis points by central banks in Southeast Asia. This difference in monetary policy stances will intensify the depreciation of Southeast Asian currencies in 2022.

Our View

We expect the most severe currency depreciation in Thailand, Malaysia, and the Philippines, followed by Indonesia and Vietnam, which will see moderate depreciation in 2022.

Indonesia: Indonesia’s position as a large net commodity exporter, particularly for coal and palm oil, will support the value of the Indonesian rupiah (IDR) through 2022. As a result, the IDR will not depreciate as much as other Southeast Asian currencies.

Malaysia: The ringgit will experience a large depreciation in 2022 as the effect of outsized rate hikes by the US Federal Reserve will outweigh the positive impact of higher palm oil exports by Malaysia. 

Philippines: Surging oil prices will bloat the country’s trade deficit as the Philippines is a net energy importer, leading to a significant depreciation of the peso. 

Thailand: The Thai baht will face depreciatory pressures from rising import prices and much slower rate hikes than the Fed, which will offset currency gains from higher tourism dollars. 

Vietnam: The Vietnamese dong will likely only see moderate depreciation due to active management by the central bank to ensure the exchange rate remains within set limits.

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