Week Ahead FX outlook:
Key FX views:
Markets will be watching closely for any signs that high‑level US–Iran talks could take shape over the coming weekend, even as no formal dates have been scheduled. This comes against the backdrop of the US naval blockade in the Strait of Hormuz aimed at curbing Iranian oil exports, with reports that at least 13 vessels have already been turned back. Offsetting this somewhat, Israel and Lebanon have agreed to a 10‑day ceasefire, raising hopes that tensions in the region could move towards broader de‑escalation. So far, markets have leaned into a constructive read: geopolitical risk premia have continued to unwind, US equities have pushed higher, the dollar has softened, and most Asian currencies have posted gains during the week. The key question is whether there is a more concrete and credible path towards de‑escalation - either via tangible progress in US–Iran diplomacy or an extension of the 2-week ceasefire. Under such a scenario, market optimism could be sustained, leaving room for Asian FX to build on recent gains vs. USD.
Meanwhile, regional fundamentals will offer some buffer, underpinned by a strong start to China’s economy in Q1, a resilient CNY, and the sustained tech upcycle. Taiwan’s export orders and industrial production, due next week, could also show robust growth, reinforcing the cyclical upswing tied to the global tech and electronics cycle - supportive for TWD and other tech-oriented FX. South Korea’s GDP release is a key regional highlight, where a potential growth rebound could help lend support to KRW. In addition, there will be some policy decisions in Southeast Asia next week. We expect Bank Indonesia to keep the BI‑Rate unchanged at 4.75%, anchoring rate expectations and supporting IDR stability. But we think BSP in the Philippines could raise rates to guard against inflation risks, despite weak growth. Singapore’s March CPI data should confirm a further rise in inflation resulting from higher imported inflation.
CNY strength underpined by China's solid Q1 export growth
