According to MUFG’s Lloyd Chan, the Indonesian Rupiah (IDR), Philippine Peso (PHP), and Indian Rupee (INR) are under significant pressure due to higher United States (US) 2-year yields and elevated Brent crude oil prices [1]. Chan notes that a meaningful relief for these currencies would likely require a de-escalation in geopolitical risks, particularly a US–Iran agreement that ensures safe transit through the Strait of Hormuz [1].
For the IDR, the outlook remains negative, with momentum skewed towards further USD/IDR upside. This is attributed to rising fiscal and current account pressures, as well as weak investor sentiment regarding government policies, which reinforce the vulnerability of the rupiah [1]. However, there is a risk of reversal if USD/IDR is already in overbought territory, especially if there is progress in US–Iran negotiations. On a valuation basis, the rupiah appears cheap on a Real Effective Exchange Rate (REER) basis, and higher-yielding SRBI instruments provide some compensation for the elevated risk premium [1].
The PHP is described as particularly vulnerable due to a sharp rise in inflation and a Bangko Sentral ng Pilipinas (BSP) policy rate of just 4.50%, which is seen as insufficient to offset the rising risk premium [1].
For the INR, the recent USD/INR rally could extend towards the 100.00 level if the Iran conflict persists and oil prices remain above $100 per barrel. The Reserve Bank of India (RBI) intervention and the possibility of rate hikes could provide intermittent support for the rupee [1].
CONCLUSION
The IDR, PHP, and INR are facing significant downward pressure from higher US yields and oil prices, with geopolitical risks further exacerbating their vulnerability. Without a de-escalation in tensions, particularly between the US and Iran, these currencies are likely to remain under strain. Central bank interventions and policy adjustments may offer only temporary relief.