Think tank Capital Economics has flagged potential risks to Asian currencies, including the Philippine peso, should Donald Trump secure victory in the upcoming US presidential election.

In a report, Capital Economics said that Trump's protectionist policies could exert depreciation pressures on regional currencies.

“We suspect Asian currencies would underperform under a Trump presidency, even if they don't seem to have been affected worse than others by the apparent rise in his chances of winning lately,” Capital Economics said.

Capital Economics said it is unexpected that most Asian currencies, including the peso, have remained stable during the recent rise of the U.S. dollar.

Capital Economics said in its Oct. 25 report that the growing chances of a Trump election win may contribute to the rise in the U.S. Treasury yields and a stronger dollar.

As a result, regions with low and stable interest rates may face challenges as their currencies weaken against a stronger dollar, increasing their risk in the global market.

“His policies could be a particularly stiff headwind for Asia's currencies,” Capital Economics said.

The peso concluded last week with a decline, dropping back to the P58 range on Friday, Oct. 25, after being off the trading floor for two consecutive days due to typhoon.

The peso decreased by 44 centavos, closing at P58.32:$1, compared to its previous finish of P57.88 on Tuesday, Oct. 22.

According to the think tank, if China's currency weakens, neighboring countries could find it harder to compete in exports and face potential U.S. tariffs.

“Other Asian currencies would probably fall too” even though the region would face the same tariffs as other countries.

This is seen as a possibility, although most Asian currencies have fallen less than anticipated since mid-September.

Over the past few years, emerging Asian central banks have taken steps to prevent currency depreciation and are likely to resist allowing a major decline now.

However, even with the potential Trump win, investors might not expect significant tariffs to be enforced, as indicated by the small rise in short-term U.S. inflation protection.

Although as caution, regional central banks may intervene as tariffs are easier to implement, the think tank explained.

Capital Economics said in its Oct. 24 report that a Trump presidency could further benefit ASEAN as companies relocate to Southeast Asia, capitalizing on strong infrastructure and supply chain connections amid ongoing U.S.-China tensions.

However, Trump’s return could complicate the situation due to potential tariffs.

Despite this, Southeast Asia may still be an attractive investment destination, particularly as non-U.S. producers remain competitive, Capital Economics also said.