OCBC’s FX Strategist Sim Moh Siong says softer Oil prices offer only limited relief to Asia FX, with the Korean Won and Indonesian Rupiah still pressured by equity outflows and policy concerns. He argues KRW fundamentals remain strong but are overshadowed by technical equity flows, while Bank Indonesia (BI) has reportedly stepped up FX intervention to stabilise the IDR.

Technical flows overshadow strong KRW

"Oil-importing Asia saw some relief from softer oil prices overnight, but FX remained under pressure, led by KRW and IDR. KRW weakness prompted renewed verbal intervention, while Bank Indonesia (BI) reportedly stepped up FX intervention to support the IDR."

"Recent KRW underperformance reflects flows rather than fundamentals. Fundamentals are positive: Semiconductor exports are strong, the KOSPI is rallying, and the Bank of Korea is signalling further rate hikes. "

"However, the AI-driven equity surge is concentrated in a handful of names, triggering rebalancing and foreign outflows due to concentration limits. This technical drag may persist near term and delay KRW upside."

"In Indonesia, parliament passed a sweeping financial sector law expanding BI’s mandate and introducing parliamentary performance reviews of BI officials."

"The mandate now more explicitly includes growth and employment alongside price and FX stability. Finance Minister Purbaya Yudhi Sadewa downplayed concerns, noting many central banks already factor in growth and jobs."

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