The Thai Baht’s stability over the twenty years has led many investors to consider it Southeast Asia’s second “safe-haven” currency, along with the Singapore dollar.
With that said, Thailand remains a fairly undeveloped economy. Investment sentiment can often get ahead of the on-the-ground realities, and this is reflected in the prices of the past decade.
The THB depreciated by about 10% against the USD over the course of the past decade but appreciated overall within a 5-year timespan.
As for how it is compared to other currencies worldwide, the baht underperformed against XDR on the ten and 5-year timeframes, but these are well within any acceptable volatility range.
In other words, the Thai Baht, at least where currency fluctuations are concerned, punches above its weight classes and is a superior investment compared to other options. We think it’s also one of the safest currencies in Asia.
Japanese Yen (JPY)
Japan was the trendsetter for Asia and started industrialization long before any of its peers – as far back as 1852, it had begun the modernization process.
Unsurprisingly, the Japanese Yen is not only considered one of the safest currencies in Asia but is also the world’s third most heavily traded and liquid currency after the USD and EUR.
This advanced economy, of course, comes at a great price, and it is one of the first economies to suffer from decade-long stagflation. During this time, the economy doesn’t develop, but inflation rises.
Consequently, Japan has debt problems wherein its debt/GDP ratio is over 200%. That’s among the highest in the world – even outdoing the United States.
Nonetheless, the situation is far from being one of doom and gloom! JPY has a long history of relative stability against other major currencies and is backed by a government with an A+ credit rating.
This is reflected fairly well in the international demand against Special Drawing Rights, which has appreciated by over 25% over the course of the last decade and 10% over the last five.
However, we can’t ignore that it has severely underperformed against the US Dollar over a decade (-30%+).
Admittedly, this is a bit of an unfair statement since it was at the highest exchange rate that it’s been in decades. And the situation has become considerably more stable since.
Malaysian Ringgit (MYR)
Malaysia’s economy is the sixth-largest in Southeast Asia. This is, in no small part, because its labor productivity is vastly more developed than in adjacent countries.
Malaysia is increasingly developing knowledge-based industries and is willing to industrialize, hence, prior assessments that it is purely an “oil-linked” currency are outdated.
You can see for yourself that the price of oil fell over the past five years to surprising lows, and yet the MYR performed rather well.
Regarding Special Drawing Rights, which represent most major world currencies, the Malaysian Ringgit generally outperformed, while purely against the USD.
Meanwhile, it underperformed by about -10%, which is comparable to most others on this list, despite being handicapped. This alone should be enough proof to show doubters that there’s much more to Malaysia’s economy than oil exports.
For some investors, the diversification built into Malaysia’s economy has made the Ringgit an attractive alternative to the SGD.
There is one catch, though: it’s illegal to hold MYR in a bank account outside of Malaysia, so you need to have local financial arrangements to invest in it.
Why Hold the Safest Currencies in Asia?
A mistake that many people will make when comparing currencies over the course of decades is to look at the relative exchange rate in a vacuum.
In the case that the currencies both fell in value relative to each other, you might initially think your investment performed well. However, when viewed in real terms and against the purchasing power of other currencies, it might paint a different picture.
Remember: You are investing in Asia to escape the hegemony of the US and diversify away from the USD.
As a hedge, it’s fully expected that you’ll see some relative volatility. But as the economies develop and the USD eventually loses prominence, holding Asia’s, and the world’s safest currencies will be an investment that pays off in the long term.
You certainly won’t be any worse off by holding a bit of Thai Baht or Singapore Dollars within an already well-diversified portfolio.
