Fourteen months ago, I anticipated a rise in Asian currencies and expected this to fuel a recovery, which would in turn fuel further growth. As far as the CNY was concerned, this expectation was essentially realised in 2024, but was completely reversed in anticipation of Trump’s election in autumn. It was not until after April 2025 that the expected upward movement of the still undervalued CNY fully took hold.
The picture was clearer for the THB and, above all, the MYR. While the THB showed a similar development to the CNY, the MYR was one of Asia’s strongest currencies, alongside the SGD.
Japan and Korea Are Special Cases
I was wrong about the JPY and the KRW. The Korean central bank is deliberately keeping the KRW close to the JPY. Japan is its main competitor in many areas. Japan itself is risking the complete collapse of its currency with its bold monetary policy. However, I think this deliberate action will be avoided due to the harmful effects it would have on government debt.
Japan owes hardly any yen to foreign countries, with more than half of its debt actually held by the central bank. This means that, although its national debt is over 237% of GDP, it is effectively still at 110%. However, the interest payments are only a fraction of those in the US, which has a similarly high level of debt and owes a quarter of its national debt to foreign countries.
However, the Japanese government, and certainly the central bank, which normally follows the government’s lead, cannot ignore developments in long-term interest rates.
I expect the yen to begin appreciating this year, albeit with a delay of around two years. As has always been the case when the yen has emerged from excessive undervaluation in the past, explosive upward movement of the yen is possible. In recent years, the BoJ and the government have been afraid of this because they have been seeking to bring about inflation. I will then explain in more detail why this should finally happen this time.
The Malaysian Ringgit and the Singapore Dollar Are Already Quite Strong Against the US Dollar
It is important not to underestimate the fact that these two currencies are still significantly undervalued against the US dollar. The ringgit, for example, is still around 30% cheaper than it was in 2011. The Singapore dollar, on the other hand, has maintained a fairly stable valuation.
However, when I compare the development of the money supply and government debt in these two small countries, it’s clear that Americans have pushed harder, thereby undermining the value of their own currency.
In my opinion, the upward trend of the last two years will continue for both the SGD and the MYR, and this trend has only just begun. Over the last 10 years, both countries have enjoyed a growth advantage over the US. Singapore is net debt-free, with sovereign wealth funds far outweighing government debt. Meanwhile, Malaysia’s government debt is at a “low” level of 70% of GDP.
Distortions Can Persist for a Long Time
In recent months, I have repeatedly pointed out in the USD editions that international investors’ tendency to invest their surplus capital solely in the US will come to an end. This became apparent last year when the rest of the world’s stock markets outperformed those in the US – and this was only partly due to the weaker USD. Not all investments in the US have been hedged. As the USD devalues more dynamically towards purchasing power parity (around 1.40 EUR/USD), this will be offset and the devaluation will accelerate. Consequently, investors’ ‘desire’ to invest their capital in the US will diminish. This will push the USD down further, and I would once again caution against underestimating how dynamic and sustained this process can be.
