According to OCBC strategists Sim Moh Siong and Christopher Wong, most Asian foreign exchange (FX) rates traded softer as Brent crude oil prices approached USD120 per barrel, raising inflation risks and prompting a hawkish repricing of the US Federal Reserve's stance. This combination of factors weighed on market sentiment and led to uneven pressure across Asian currencies, with the South Korean Won (KRW) and oil-sensitive currencies such as the Philippine Peso (PHP) and Thai Baht (THB) experiencing more significant declines. In contrast, the Renminbi (RMB) demonstrated relative resilience, although it also traded softer against the US dollar [1].
The strategists noted that the focus remains on oil prices and supply, emphasizing that a prolonged standoff between the US and Iran could further tighten the oil market and necessitate higher oil price repricing. This scenario would likely continue to dampen Asian FX momentum. Recent geopolitical developments include reports of former US President Trump preparing to extend a naval blockade on the Hormuz Strait until a nuclear deal is reached, while CNN reported that Iran is expected to submit a revised plan soon [1].
OCBC highlighted that geopolitical developments remain fluid. They suggested that any signs of de-escalation in tensions, coupled with easing oil prices, could alleviate depreciation pressure on Asian FX [1].
CONCLUSION
Asian currencies have come under pressure due to surging oil prices and a more hawkish Fed outlook, with the impact most pronounced on oil-sensitive and high-beta currencies. The situation remains dynamic, and any easing in geopolitical tensions or oil prices could provide relief to Asian FX markets.