KUALA LUMPUR (Nov 5): The Malaysian ringgit is the cheapest among Asia ex-Japan currencies followed by the Indonesian rupiah and South Korean won based on the latest valuations compiled by DBS Bank Ltd.

In a research note on Friday (Nov 5), DBS FX and credit strategist Chang Wei Liang wrote that the ringgit and rupiah are perhaps the two Asian currencies that stand to benefit most from rising commodity prices.

Chang said Malaysia and Indonesia "could see improving terms of trade".

Based on the latest Asian ex-Japan DBS Equilibrium Exchange Rates (DEER) valuation chart in the DBS note, he said the ringgit is undervalued at a -11.3 reading followed by the rupiah (-4.6) and won (-0.6).

"In Asia ex-Japan, [the] ringgit, rupiah, and won are the most undervalued, while [the] Philippine peso, Thai baht and Indian rupee rank as the most overvalued,” he said.

According to Chang, the Philippine peso is the most overvalued with a reading of 15.2 based on the latest Asian ex-Japan DEER valuations while the baht and rupee’s readings stood at 6.5 and 3.6 respectively.

According to DBS’ website, the DEER valuation was first conceptualised to model long-term currency fair values.

In a note dated July 1, 2021 posted on DBS’ website, Chang claimed that by applying rigorous tests and extensive simulations, DBS created a systematic currency strategy based on DEER valuations to produce positive, long-term returns.

At the time of writing on Friday (Nov 5, 2021), the ringgit weakened to 4.1582 against the US dollar but strengthened to 3.0736 versus the Singapore dollar.

Compared to the euro, the ringgit appreciated to 4.8008.