OCBC’s FX Strategist Christopher Wong highlights that Asian FX has seen a modest stabilisation after an oil- and rates-led sell-off, helped by softer Brent and a pause in United States (US) yield gains. South Korean Won (KRW) led the rebound, while Indian Rupee (INR), Indonesian Rupiah (IDR) and Philippine Peso (PHP) remain vulnerable if Brent stays high. Wong cautions that elevated bond yields still limit scope for a sustained Asia ex-Japan (AxJ) FX recovery.

Tentative stabilisation across AXJ

"Asian FX showed tentative signs of stabilisation after the recent oil and rates-led sell-off."

"The improvement was modest, but the absence of a fresh leg higher in Brent and UST yields helped to take some pressure off AXJs, while the rebound in parts of Asia equities also helped risk proxies."

"Further pullback requires oil prices to ease further or geopolitical tensions in Middle East to de-escalate."

"In the interim, oil-sensitive FX such as INR, IDR and PHP remain vulnerable if Brent stays elevated, while still-elevated bond yields continue to limit the scope for a sustained AXJ recovery."

"We continue to keep a look out for any signs of stabilisation in the rates space."

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