Week Ahead FX outlook:
Key FX views:
The primary focus for Asia FX market next week likely remains on the development of the war. Investors should closely monitor crude oil and Asian LNG (JKM) spot prices for any signs of stabilization or further escalation following the Strait of Hormuz disruptions. It worth noting that although US-Isreal and Iran war has pressured on Asia currencies against the US dollar, the degree of Asia currency depreciation still has been quite modest overall with the worst depreciation of roughly 2-2.3% happening for KRW, PHP and THB, amid a 1.4% appreciation of the US dollar (DXY index). Markets thus far clearly is only pricing in a short-lived war, a short-lived disruption to energy and overall global markets. Any drastically different outlook for the future development of the war would mean more disastrous market reaction, including Asia FXs. Additionally, with some of Asian FXs’ values at historical low, the potential further trade balance shock should energy prices further rise, may prompt some of Asian central banks to intervention in FX markets, including potential "verbal intervention" from Japanese and South Korean officials to stem the rapid depreciation of the JPY and KRW.
Markets will likely shift part of their attention next week to macro policy divergence as key data drops. Most critical is the US CPI on March 10, where an upside surprise would reinforce the Fed’s 'higher-for-longer' stance and pressure Asian EM capital flows, as well as Asian currencies too. Within Asia, focus remains on China’s M2, Social Financing, and industrial output mid-week. Following the delivery of the Government Work Report, the "Two Sessions" will shift next week to ministerial press conferences and delegation deliberations to finalize the 2026 agenda. Finally, keep a close watch on equity-FX correlations and specific regional data that could trigger idiosyncratic moves. India's CPI inflation and Industrial Production (Thursday, March 12) will be vital for determining if the Reserve Bank of India (RBI) will let the Rupee slide further to protect exports or hike rates to fight imported energy inflation. Across North Asia, attention turns to export momentum and growth resilience.
High energy price sensitivity pressures PHP, THB, KRW, while INR shielded partly by 30-day US waiver to buy Russian oil
