Asian currencies have recently hit their lowest levels in over 19 months due to a strengthening U.S. dollar, fueled by expectations of prolonged high U.S. interest rates.
The Bloomberg Asia Dollar Index dropped by 0.1% to its lowest point since November 2022, reflecting significant declines in currencies like the Philippine peso, Indian rupee, and South Korean won, which nears 1,400 per dollar.
Nigel Green of Devere Group attributes this depreciation to the Federal Reserve's likely continuation of elevated interest rates, contrasting with rate adjustments in other regions.
This scenario leads to capital outflows from emerging markets, higher borrowing costs for dollar-denominated debts, and increased export expenses.
The ongoing depreciation of the Japanese yen further exacerbates pressures on other Asian currencies, posing risks such as inflation, reduced consumer spending, and broader financial instability.
Green predicts a bearish outlook for Asian currencies throughout the remainder of 2024.