BNY said Asia foreign exchange is supported by accommodative monetary policy, fiscal expansion, and export growth linked to AI and semiconductors. It said it is constructive on CNY, TWD, KRW and MYR, neutral on SGD and IDR, and cautious on INR, THB and PHP.
It said sustained and elevated crude prices could hurt net oil importers through the trade balance, particularly THB, KRW, INR and JPY. It added this is unlikely to change the broader inflation path at this stage.
Asian Fx Outlook Remains Supportive
For Japan, BNY said Tokyo CPI for February, plus January PPI, retail sales and industrial production, will test the durability of price pressures. It said JPY volatility may stay elevated, and weekly portfolio flow data will be watched after strong recent foreign inflows to Japanese equities and bonds.
For India, it said Q4 GDP and January fiscal deficit data will influence INR performance and bond supply expectations. The article said it was created with the help of an Artificial Intelligence tool and reviewed by an editor.
The fundamental picture for Asian currencies remains supportive heading into March. Accommodative monetary policies and strong export growth, particularly from the AI and semiconductor sectors, are creating a positive backdrop. January 2026 data confirmed this, showing regional semiconductor exports surged by over 12% year-over-year, reinforcing our confidence.
We maintain a constructive view on the Chinese Yuan, Taiwan Dollar, South Korean Won, and Malaysian Ringgit. Derivative traders should consider positioning for further appreciation, perhaps using call options to capture upside while defining risk. This stance builds on the recovery momentum these currencies showed against the dollar in the final quarter of 2025.
Crude Oil Remains A Key Risk
Caution is warranted for the Indian Rupee, Thai Baht, and Philippine Peso. With WTI crude prices holding firmly above $85 a barrel this month, these net oil importers face headwinds. Traders could consider protective put strategies or simply remain on the sidelines for now.
Upcoming data from Japan will likely keep yen volatility elevated, creating trading opportunities. With the key Tokyo CPI for February coming in at 2.9%, just above expectations, uncertainty around the Bank of Japan’s next move is high. Traders could look at strategies like straddles to profit from expected price swings in USD/JPY, regardless of the direction.
We are closely watching India’s upcoming Q4 GDP figures, which are critical after the period of strong growth observed through much of 2025. The results, along with the January fiscal deficit numbers, will directly impact INR and bond market expectations. Traders should be prepared for a potential spike in volatility around these releases later this week.
The sustained strength in crude oil prices, which have climbed over 5% since the beginning of February, remains a key risk. This weighs on net importers like Thailand, South Korea, India, and Japan. For those holding long positions in currencies like the KRW, hedging with options on oil futures could be a prudent move.
