Asia FX Talking: Support measures stacking up

Articles Asia FX Talking: Support measures stacking up 08:16 FX Talking China India Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Many Asian currencies have had a difficult few months amid higher energy prices, rising US rates, tech volatility and some questionable policy choices. Local authorities are unleashing a raft of measures to attract foreign capital and support their currencies. As these steps gain traction, a period of calmer trading may emerge by summer Deepali Bhargava , Min Joo Kang and Lynn Song Policy support gathers pace as pressures on Asian currencies persist, with the yuan showing relative resilience USD/CNY: Appreciation trajectory remained intact Spot One month bias 1M 3M 6M 12M USD/CNY 6.76 Neutral 6.76 6.73 6.70 6.65 The Chinese yuan was an outperformer last month, with the USD/CNY drifting lower, touching a low of 6.76.

A strong May trade surplus and less resistance to appreciation from daily fixings offset a wider US-China yield spread, supporting the CNY over the past month. We hold our 6.70-7.05 fluctuation band forecast, with risks to the downside. New tightening on capital outflows adds to the CNY-bullish macro backdrop.

Market participants still seem to largely favour further CNY appreciation. USD/KRW: KRW to remain weak and volatile in near term Spot One month bias 1M 3M 6M 12M USD/KRW 1517.00 Neutral 1515.00 1475.00 1475.00 1450.00 USD/KRW has been the worst-performing Asian currency, briefly breaking above 1,550 before intervention by the authorities brought it back toward the 1,525 level. A chip-led current-account surplus is expected to widen towards historic highs.

But geopolitical risks and large outbound portfolio flows should keep USD/KRW near 1,515 in the near term, with 1,550 as a key intervention risk level. The Bank of Korea is expected to hike rates in July and signal additional tightening. We expect 50bp of hikes this year and another 25bp in 1H27.

Narrowing the yield gap with the Federal Reserve should support a mild appreciation in the Korean won in 2H26. USD/INR: Likely to trade with upward bias Spot One month bias 1M 3M 6M 12M USD/INR 95.03 Mildly Bullish 95.50 94.50 94.00 93.00 We are factoring in mild appreciation in our Indian rupee forecast for the second half of the year. A sizable balance-of-payments deficit - driven by a higher import bill and continued foreign outflows - remains a headwind.

But recent measures by the Reserve Bank of India to encourage capital inflows should gradually become supportive. The RBI announced that it will bear the full hedging cost for three- to five-year foreign currency non-resident (FCNR) deposits. This measure could enable banks to raise an estimated $20–40bn in deposits, helping to bridge the balance-of-payments gap.

In addition, exempting foreign investors from taxes on government bonds means debt inflows should improve, supported by stable fiscal dynamics. At the same time, a combination of RBI FX management and the recent correction in the REER, which has brought the INR closer to undervalued territory, should provide further support to the rupee. USD/IDR: Depreciation risks remain despite rate hikes Spot One month bias 1M 3M 6M 12M USD/IDR 17870.00 Mildly Bullish 18000.00 18000.00 17900.00 17500.00 Bank Indonesia surprised markets with two back-to-back rate hikes of 50bp and 25bp, respectively, over the last month.

This reiterates that currency stabilisation remains a key policy priority, providing some near-term support for the rupiah. BI introduced additional measures to enhance the appeal of Indonesian assets to foreign investors, including reduced hedging costs. However, domestic factors remain the primary constraint.

Limited visibility around the policy environment – including the fiscal outlook, sovereign rating trajectory, and broader growth strategy – continues to weigh on sentiment. Additionally, Indonesia’s recent move to centralise exports of key commodities – including coal, palm oil and nickel – under a state-owned entity introduces a new layer of policy risk at a time when investor sentiment is already fragile. As a result, foreign participation is likely to stay subdued, leaving the IDR vulnerable to continued depreciation pressures despite tighter monetary policy.

USD/PHP: No turnaround in sight yet Spot One month bias 1M 3M 6M 12M USD/PHP 60.66 Mildly Bullish 61.50 61.50 61.00 59.50 Inflation risks remain firmly on the upside. Second-round effects amid the ongoing pass-through of elevated global oil prices – particularly into electricity, gas, and restaurant prices – show little sign of abating. Thus, we maintain our forecast for CPI inflation to average 5.8% year-on-year in 2026, well above the central bank’s 4% target.

We expect a 25bp rate hike in June, with rising odds of a larger 50bp move should there be no clear progress toward de-escalation in the war. With oil prices now expected to average around $110/bbl in the third quarter, pressure on the current account deficit is likely to intensify. At the same time, heightened political tensions, triggered by the impeachment of the vice president and the subsequent escalation among allies, are set to keep risk sentiment subdued.

This could further delay reforms, slow the pace of the recovery in growth, and weigh on the peso. USD/SGD: More tightening likely Spot One month bias 1M 3M 6M 12M USD/SGD 1.28 Neutral 1.28 1.27 1.26 1.26 Singapore remains one of the strongest growth stories in the region. GDP growth accelerated to 6% YoY in the first quarter, up from an average of 5% YoY in 2025.

This is largely driven by government spending and robust industrial production, particularly in the electronics sector amid the global tech cycle. Inflation numbers are yet to see the full impact of higher global oil prices. Risks to inflation are skewed to the upside.

The Monetary Authority of Singapore’s tightening bias remains intact, and we expect further policy tightening at the July meeting. This should provide a supportive floor for the currency in the lead-up to the decision. USD/TWD: Rangebound pattern holds with CBC meeting ahead Spot One month bias 1M 3M 6M 12M USD/TWD 31.62 Neutral 31.60 31.40 31.20 30.90 The USD/TWD remained range-bound for another month, trading in the same band between 31.3-31.7.

The FX pair's stagnation contrasts with the exciting moves in equity markets and macro data. Capital inflows continued for much of May before global tech sell-offs drove outflows in early June. US-TW yield spreads were fairly stable.

We expect the Central Bank of China to remain on hold at its June monetary policy meeting, but its guidance is important to watch. We currently have a rate hike pencilled in for the third quarter, which could support the Taiwan dollar. Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.

The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Deepali Bhargava Regional Head of Research, Asia-Pacific Deepali Bhargava joined ING in 2024 and is Head of Research and Chief Economist Asia-Pacific. She has over 19 years of work experience as a macro specialist covering rates, FX and equity markets… Min Joo Kang Senior Economist, South Korea and Japan Min Joo Kang is ING’s senior economist in Seoul covering the South Korean and Japanese economies.

Prior to ING, Min Joo worked for Korea’s National Pension Service as Head of Investment… Lynn Song Chief Economist, Greater China Lynn Song joined ING in January 2024 as the Chief Economist for Greater China. Prior to joining ING, he worked at China Construction Bank International, China Merchants Securities (HK), and Haitong…