Rabobank strategists underline that the Monetary Authority of Singapore (MAS) has tightened policy via the exchange rate despite weak GDP, reacting to potential core inflation from the energy shock. They also note Indonesia’s dual engagement with Russia and the US, and highlight the strategic importance of the Strait of Malacca, suggesting Asian FX will be sensitive to both policy and geopolitical developments.

Singapore policy shift and Malacca risks

"Yes, in Singapore, the MAS just became the first major Asian economy to tighten policy into this energy crisis (as usual, via the exchange rate) due to fears that core inflation could rise ahead despite a negative Q1 GDP print. Will that prove a bell-weather globally?"

"Yes, Indonesia’s President Prabowo just met with Putin in Moscow. However, his defence minister just simultaneously agreed a deepened US defence partnership. Notably, the latter is reported to allow US flyover of military aircraft, which gives the Pentagon new access routes to both the Middle East and Asia. Moreover, for those wanting to join certain dots, Indonesia, along with Singapore, is home to the Strait of Malacca, another of the world’s critical energy and cargo chokepoints. Singapore is of course deeply opposed to any new ‘toll ways’ emerging in critical waterways."

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