MUFG reports strong US Dollar, elevated Treasury yields, and high oil prices pressuring Asian currencies. Indian Rupee, Indonesian Rupiah, and Thai Baht are most vulnerable. RBI’s FX measures may help India. Maintains end-2026 forecasts: USD/IDR at 18,350 and USD/THB at 34.10.
Key Points
Market Pressures
• Strong US Dollar, elevated Treasury yields, and high oil prices are depreciating Asian currencies
• Indian Rupee, Indonesian Rupiah, and Thai Baht face particular vulnerability
• Regional FX experiencing significant depreciation pressure across multiple fronts
Policy Responses & Headwinds
• RBI’s FX measures aim to curb rupee speculation and temper INR downside pressure
• Rising crude prices remain a persistent headwind for Asian economies
• Elevated US yields reduce appeal of Indonesian assets, triggering foreign portfolio outflows
Forecasts & Outlook
• MUFG maintains end-2026 USD/IDR forecast at 18,350
• USD/THB forecast held at 34.10 for end-2026
• Thai economy particularly stressed by stronger dollar and oil prices affecting energy import costs
Asian Currency Market Analysis
Headwinds Pressuring Asian Foreign Exchange Markets
MUFG identifies multiple macroeconomic factors creating significant depreciation pressure across Asian currencies. A combination of firm US dollar strength, elevated US Treasury yields, and rising oil prices are collectively weighing on regional foreign exchange markets. Among Asian currencies, the Indian Rupee (INR), Indonesian Rupiah (IDR), and Thai Baht (THB) are considered particularly vulnerable to these external pressures. These three currencies face intensified downside risks compared to other regional peers, making them susceptible to further depreciation in the near term. The convergence of these factors reflects broader global economic conditions that disproportionately affect currencies in emerging Asian markets, which remain sensitive to capital flows and commodity price movements.
Regional Currency-Specific Vulnerabilities and Policy Responses
The Indian Rupee faces headwinds despite Reserve Bank of India (RBI) interventions designed to stabilize the currency. The RBI has implemented recent foreign exchange measures aimed at curbing speculative pressure on the rupee, which may help moderate further depreciation. However, elevated crude oil prices continue to pose structural challenges to the Indian economy. In Indonesia, the situation is similarly complex, as elevated US Treasury yields reduce the relative attractiveness of Indonesian assets and increase sensitivity to foreign portfolio outflows. MUFG maintains its end-2026 forecast for USD/IDR at 18,350, reflecting expectations of continued pressure on the rupiah despite potential stabilizing factors.
Thailand’s Energy Import Challenges and Currency Outlook
Thailand’s Baht remains exposed to the dual pressures of stronger US dollar dynamics and higher oil prices. These combined forces create structural vulnerabilities, particularly by raising Thailand’s energy import costs and weakening the nation’s terms of trade. As an energy-importing economy, Thailand experiences compounded negative effects from oil price increases paired with currency depreciation. MUFG maintains its end-2026 USD/THB forecast at 34.10, reflecting expectations of ongoing baht weakness driven by these external factors. This forecast suggests that without significant shifts in global oil markets or US monetary policy, the Thai currency will continue facing depreciation pressure throughout the forecast period, affecting both importers and the broader economy.
Source : Asian FX: Higher US yields keep regional currencies under pressure
