BNY’s Bob Savage highlights a surge in foreign exchange (FX) intervention across Asia-Pacific (APAC) as regional currencies face mounting pressure from higher oil prices and geopolitical risks [1]. The Reserve Bank of India (RBI) has implemented aggressive macroprudential measures to curb Indian Rupee (INR) depreciation, including capping banks’ FX Net Open Positions and restricting onshore dealers from offering INR NDF contracts [1]. These actions reflect a growing urgency to maintain financial stability and prevent disorderly currency movements [1].
Sentiment in APAC markets remains fragile, with rising FX and equity volatility driven by persistent foreign capital outflows [1]. March witnessed record foreign net selling in South Korea, Taiwan, and India, amplifying swings in equity markets and adding pressure to regional currencies [1]. The Indonesian Rupiah (IDR), Philippine Peso (PHP), and South Korean Won (KRW) are identified as the most vulnerable, trading near all-time lows against the US dollar [1].
Positioning data from iFlow indicates a shift in holdings, with IDR and INR moving from significantly overheld to underheld status, while the Taiwan Dollar (TWD) remains deeply underheld [1]. This suggests rising hedging demand and continued volatility, as currencies may lag in any risk-on environment due to adverse terms-of-trade dynamics [1].
BNY advises caution in APAC FX markets, warning that ongoing volatility and lagging performance are likely to persist, especially given the fragile sentiment and continued foreign outflows [1].
CONCLUSION
APAC central banks are intensifying FX intervention to counter USD strength and safeguard financial stability, but regional currencies remain vulnerable amid persistent foreign outflows and geopolitical risks. Market volatility is expected to continue, with caution advised for investors as adverse terms-of-trade dynamics weigh on currency performance.