Week Ahead FX outlook:
Key FX views:
The week ahead presents a nuanced macro environment for global FX markets, with the USD navigating a pivotal FOMC meeting, while Asia FX contends with a mix of growth, trade, and production data. The Fed’s policy stance is unlikely to shift at the upcoming FOMC meeting, where rates could stay at 3.50%–3.75%. But markets will scrutinize the Fed’s statement and forward guidance for any recalibration of inflation and growth risks, with implications for USD/Asia pairs.
Across Asia, currencies are positioned for a week of differentiation driven by contrasting macro signals. In Singapore, we expect MAS to keep monetary policy unchanged at its upcoming January decision, maintaining the current S$NEER settings - slope, width, and centre - while reiterating its willingness to act if growth deteriorates meaningfully. A steady MAS policy stance, coupled with resilient domestic fundamentals, should keep SGD relatively resilient. Short‑term fluctuations in USDSGD could reflect external drivers, though, particularly the upcoming FOMC meeting. Meanwhile, South Korea’s industrial production data will be critical in confirming whether the tech‑driven recovery is continuing, positioning tech-linked currencies such as MYR, TWD, and KRW to benefit if global electronics demand remains firm. Taiwan’s advance GDP data could also underscore continued strong momentum in the semiconductor sector, offering a constructive backdrop for TWD. However, the Philippine peso confronts a potential slowdown in GDP growth for Q4, alongside persistent trade deficits.
Should Asia’s industrial production and trade indicators hold steady, export-oriented currencies could outperform in the week ahead. Conversely, a hawkish‑leaning FOMC message or evidence of weaker global demand could support the USD and align with a potential reversal in recent bout of Asian FX strength, and in particular, relative underperformance in high-yielding currencies like INR, IDR, and PHP.
Increasing Divergence in Asia FX Heading Into FOMC Week
