Asia week ahead: Key data from Indonesia, China, Japan, and South Korea
As we approach critical economic data releases in Asia, the focus will pivot to inflation metrics and manufacturing indices that could impact regional currencies. Per the full note from ING, Indonesia's CPI inflation is projected to rise further, while China's purchasing managers' index (PMI) remains a key indicator for economic health. These data points will likely influence trader sentiment and positioning in the coming week, particularly for the IDR and CNY. With South Korea set to release export figures, expectations of recovery could bolster the KRW's strength against weaknesses in the JPY and CNY, shaping off-the-cuff market reactions.
What the desk is arguing
The desk believes that upcoming inflation data from Indonesia and manufacturing figures from China will play a decisive role in determining FX market sentiment. Per the full note source, Indonesia's CPI is expected to edge higher, providing insights into energy cost pass-through to domestic prices, while China's PMIs hover around critical thresholds that could signal economic contraction or stability.
The potential rise in Indonesia's inflation, driven by elevated oil prices and currency depreciation, may keep inflation within the Bank Indonesia’s target range but still heighten the risk of market volatility. Specifically, the report anticipates Indonesia's CPI may rise due to these second-round effects, which could impact the IDR if traders interpret the data as indicative of broader inflationary pressures.
Where it sits in our coverage
Our consensus target for USD/IDR sits at 1.075, with a range spread between 1.04 and 1.12. jpmorgan forecasts the pair at 1.10 by March 2026, while bofa is more bearish, anticipating a drop to 1.04 over the same tenor.
This aligns with the desk’s outlook as we remain cautious about Indonesia's CPI, positioning it towards the middle of our range. The desk’s view suggests a potential movement towards the upper end of this spectrum should inflation data come in higher than expected.
How other firms see it
Firms aligned with our view include jpmorgan, which anticipates careful bullish positioning toward the IDR as inflation pressures build. In contrast, bofa offers a contrary perspective, focusing on potential weakness driven by external factors that could weigh on the IDR.
Traders should keep an eye on the USD/IDR trajectory in tandem with China's PMI, as this may provide insights into broader trends affecting emerging market currencies.
What the calendar says
With no high-impact events scheduled in the upcoming 30 days, focus will remain on the data releases from Indonesia and China this week, particularly the CPI and PMI readings on which traders will have to pivot their strategies.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Expect Indonesia's CPI to rise due to oil prices and currency depreciation.
- 02China's PMIs are critical to gauge economic momentum.
- 03Focus on the interplay between IDR, CNY, and KRW amid economic data.
- 04Potential market volatility contingent on inflation data outcomes.
Market implications
Watch for shifts in the IDR and CNY as inflation and PMI data release early next week. A stronger-than-expected Indonesia CPI might strengthen the IDR, while US-China trade dynamics could influence the CNY accordingly.
Risks to this view
Any unexpected drop in Indonesia's CPI or a contraction in China's PMI could invalidate the bullish sentiment on the IDR, leading to a reversal in positioning against major currencies, particularly the USD.
Articles Asia week ahead: Key data from Indonesia, China, Japan, and South Korea 06:06 Asia week ahead China Indonesia Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Data highlights include Indonesia’s CPI inflation, China’s purchasing managers’ index, South Korea’s exports and Japan’s Tankan survey. Also, the People’s Bank of China will conduct a new overnight reverse repo operation Deepali Bhargava , Min Joo Kang and Lynn Song Asia Research highlights of the week Higher Tokyo inflation, hawkish BoJ comments, up odds of October hike ING lifts South Korea 2026 GDP growth forecast to 4% from 3% What the US-Iran peace deal means for Asia Iran peace deal not enough to halt tightening in the Philippines and Indonesia Indonesia: Inflation expected to rise further We expect Indonesia’s CPI inflation to edge slightly higher, driven by second-round effects amid elevated oil prices and IDR depreciation. The data will offer insights into the extent to which higher energy costs are feeding through to domestic prices.
Nonetheless, the impact is likely to be contained, with inflation remaining within Bank Indonesia’s target range. China: New PBOC repo operation and industrial data China releases the May industrial profits data on Saturday. During the week, we'll get June purchasing managers’ index data.
Industrial profits have been recovering this year, driven by the computer, communications and electronic equipment and mining sectors. We expect the uneven recovery in profit growth to continue, with sectors supported by the tech boom gaining while other areas remain relatively soft. We’re looking for the official PMI data to hover near the 50-threshold separating expansion and contraction.
The manufacturing PMI is expected to edge up 0.1pp to 50.1, while the non-manufacturing PMI may slide back into contraction territory at 49.9. Momentum has been lacklustre in the second quarter. PMI data will give us a first look at whether a June rebound could be in the cards.
The People’s Bank of China is set to conduct a new overnight reverse repurchase operation next Monday. The interest rate it sets will be watched closely by markets. This is in line with recent policy signalling, suggesting we’ll eventually see the PBOC move its benchmark rate from its current 7-day reverse repo rate to an overnight reverse repo rate.
The aim would be to better align policy tools with those of global peers and to improve the transmission of monetary policy. South Korea: Exports and industrial production to rebound Strong chip demand should support South Korean exports and industrial production. We expect exports to surge more than 60%, and industrial production to rebound after a temporary drop in April.
Easing geopolitical tensions should also give the manufacturing PMI a lift. Inflation is expected to accelerate further as the second-round effects from higher oil prices become more visible. The recent decline of global oil prices won’t be reflected in domestic gasoline prices for another couple of months, while petrochemicals and related product prices are likely to remain sticky.
Japan: Stronger Tankan survey expected despite energy shock Japan’s monthly activity data is likely to contract in May as energy shocks interrupt production activities and reduce petrol consumption. However, we think survey data should improve, signalling the recovery of activity in the coming quarter. The Bank of Japan’s Tankan survey is expected to show an increase amid strong chip demand and an improved situation in the Middle East.
PMI surveys for both manufacturing and services are likely to advance. Key events in Asia next week South Korea Japan Indonesia China 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… In this article Asia Research highlights of the week Indonesia: Inflation expected to rise further China: New PBOC repo operation and industrial data South Korea: Exports and industrial production to rebound Japan: Stronger Tankan survey expected despite energy shock
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