Asia FX Weekly: Focus on Trump-Xi Meeting

This report analyzes the impact of the upcoming Trump-Xi summit and the Iran conflict on Asian currencies, highlighting the diverging inflation and policy paths between major Asian economies.

Key Takeaways

• 1.The upcoming Trump-Xi meeting on May 14-15 is the primary market focus, with expectations of modest agreements on trade and supply chains despite deep technological friction.
• 2.The Iran conflict and potential closure of the Strait of Hormuz are driving oil price volatility, significantly impacting Asian economies through energy costs and inflation expectations.
• 3.The Philippines is experiencing a severe inflation shock, with April CPI reaching 7.2%, far exceeding forecasts and likely prompting aggressive central bank tightening.

Table of Contents

• FX views
• USD/CNY: Likely to see mild positives from the Xi-Trump summit next week
• USD/TWD: Tech rally supported TWD, but volatility will remain
• USD/INR, USD/PHP and USD/VND: Dramatic increase in Philippines inflation
• USD/THB: Signs of progress in US-Iran deal needed for baht stability
• Week in review
• Capital Flows
• Government bond yield spreads: Decreased for 2y and 10y
• Central bank monitor
• The week ahead
• Forecasts
• Core indicators

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