Asian FX: Relief rally and differentiation theme – OCBC

OCBC strategists Sim Moh Siong and Christopher Wong characterize recent moves in Asian FX as a relief rally driven by lower Oil and hopes of a US–Iran deal. They stress that any agreement and normalization of flows through the Strait of Hormuz remain uncertain. They expect high‑beta, AI/tech‑linked currencies like Taiwan Dollar (TWD), South Korean Won (KRW) and Malaysian Ringgit (MYR) to outperform, while Oil‑sensitive units such as Indonesian Rupiah (IDR), Indian Rupee (INR), Philippine Peso (PHP) and Thai Baht (THB) stay pressured.

High beta gainers versus oil-sensitive laggards

"Most Asian FX rebounded, alongside the sharp pullback in oil prices overnight, as markets reacted to news that Iran is evaluating new US proposal to end the war."

"KRW and THB led rebound. Iran has about 48 hours to revert, and it remains early to concur at this point if there is any agreement. We are cautiously hopeful but still see this more as a relief rally rather than a full reversal, unless geopolitical tensions de-escalate more meaningfully."

"High-beta, AI/tech proxy Asian FX, including TWD, KRW and MYR should see gains play catch-up while oil-sensitive currencies such as IDR, INR, PHP and THB should stay under pressure. Low beta Asian FX including SGD may continue to hold up but its gains may pale in comparison relative to KRW and TWD."

"Even as a deal may be reached, the normalisation of energy flows through the Strait of Hormuz remain a key sticking point. As such, the differentiation theme earlier highlighted still holds."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)