OCBC strategists Sim Moh Siong and Christopher Wong observes that Asian FX has shown tentative stabilization after a multi-week sell-off linked to the Iran conflict, but characterizes the move as consolidation. Without a quick resolution, growth- and Oil-sensitive currencies such as South Korean Won (KRW), Philippine Peso (PHP) and Thai Baht (THB) may stay soft, even as policymakers lean against volatility with several pairs near multi-year or all-time lows.

KRW, PHP and THB stay vulnerable

"Asian FX showed tentative signs of stabilisation after the multi-week sell-off since the start of Iran conflict, but the tone remains fragile."

"The pause in Asian FX depreciation looks more like consolidation, with markets still balancing de-escalation hopes against re-escalation risks."

"Meanwhile, the shock may already have feed into the real economy, evident in policy responses in Asian nations including Korea and the Philippines while spillovers onto food, fertiliser and tourism risks are building."

"Absent a quick resolution with Iran conflict, Asian FX, sensitive to growth, sentiment and oil including KRW, PHP and THB may continue to trade on a weaker footing."

"That said, we also expect policymakers to smooth price action given that some of the Asian FX are already testing their multi-year lows."

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