Asia FX Weekly: Asia Inflation and RBI Meeting

MUFG analyzes the impact of rising oil prices and hawkish central bank shifts across Asia, with a focus on upcoming inflation data and interest rate decisions in India and the Philippines.

Key Takeaways

• 1.Asian central banks, including the RBI and BSP, are shifting toward a more hawkish stance as oil-driven inflation and currency weakness create significant policy trade-offs.
• 2.China has formalized a 2026-2030 urban renewal plan targeting RMB 15-20 trillion in investment, providing a medium-term hedge against the ongoing housing downturn.
• 3.Geopolitical risk has slightly eased with a potential 60-day US-Iran truce extension, bringing Brent oil prices down toward $92/bbl and improving risk sentiment for Asian currencies.

Table of Contents

• FX views
• FX PERFORMANCE
• USD/CNY: CNY received mild support from optimism around US-Iran deal
• USD/KRW: Strong hawkish hold by the BoK
• USD/INR, USD/PHP and USD/VND: Hope versus Fears
• USD/SGD: Policy and fundamentals underpin SGD resilience
• Week in review
• Capital Flows
• Government bond yield spreads: Increased for 2y and 10y
• Central bank monitor
• The week ahead
• Forecasts
• Core indicators

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