Asian currencies have broadly weakened since the June FOMC meeting, with the move linked to wider swap rate differentials and a US \u201chigher-for-longer\u201d rates backdrop. THB, KRW and PHP have posted the sharpest declines, while INR and VND have been steadier, a divergence tied to relative yield profiles and differing policy settings across the region.<\/p>\n
Thailand\u2019s baht is described as exposed as a low-yielding unit, alongside a growth-oriented stance from the Bank of Thailand. The Philippine peso has also drifted lower despite higher carry, with further downside framed as potentially tempered if the BSP tightens policy, subject to external conditions such as the absence of another energy price shock. In Indonesia, Bank Indonesia\u2019s rate hikes and FX support measures are associated with reduced volatility that could slow rupiah depreciation, while planned cuts to the free school lunch programme\u2014about 0.2% of GDP, or 15% of the 2026 budget\u2014are cited as incremental fiscal backing.<\/p>\n
Given the high-for-longer US interest rate environment, we are maintaining a defensive stance on select Asian currencies. With US core CPI for May 2026 holding firm at 3.1%, well above the Federal Reserve’s target, the US dollar is likely to remain strong in the coming weeks. This widens the interest rate gap and puts downward pressure on lower-yielding currencies in the region.<\/p>\n
We are therefore focusing on derivative strategies that anticipate further weakness in the Thai baht (THB), Korean won (KRW), and Philippine peso (PHP). The baht is particularly vulnerable, as Thailand’s recent Q1 2026 GDP growth of only 1.7% reinforces the central bank’s priority for growth over currency support. We see opportunities in buying USD\/THB call options to profit from expected baht depreciation.<\/p>\n
The Philippine peso is also struggling, as the country’s trade deficit widened to $4.8 billion in May 2026, showing that its relatively high policy rate of 6.50% is not enough to shield the currency. This fundamental pressure suggests that selling PHP futures contracts is a viable strategy to position for continued weakness. We believe the peso’s high yield does not sufficiently compensate for the risk.<\/p>\n
In contrast, Bank Indonesia’s direct support for the rupiah, confirmed by a modest $2 billion dip in foreign exchange reserves last month, makes us more cautious about betting against it. This creates potential for relative value trades, such as a pair trade that goes long the more stable Indian rupee (INR) while shorting the Thai baht (THB). This strategy allows us to capitalize on the policy divergence within the region itself.<\/p>\n
This pattern is reminiscent of the 2022-2023 period, where Asian currencies with supportive central banks and stronger fundamentals significantly outperformed those with low yields. We expect this trend to continue, making it crucial to differentiate between currencies rather than taking a uniformly bearish view on the entire region. Our strategies will favor currencies with central banks that are actively defending their value.<\/p>\n\n\n\n