Asia FX Talk FOMC decision looms as oil and US yields stay elevated

Asia FX Talk Asia FX Talk LLOYD CHAN Senior Currency Analyst FOMC decision looms as oil and US Global Markets Research Global Markets Division for Asia yields stay elevated T: E:

Market Highlights The US dollar strengthened modestly overnight, while US Treasury yields continued their march higher across the curve. The US 10y Treasury yield has now reached 5.00%, while the 2y yield climbed to 4.66%. Since the start of the year, US 10y yields have risen by more than 80bps, while Asian and European yields have also surged, amidst rising commodity prices.

Market attention now turns to the FOMC meeting decision later today. Markets are pricing more than a 90% probability of a 25bps Fed rate hike, while expecting a cumulative two hikes by year-end. That said, the Fed faces a difficult trade-off. On MUFG Bank, Ltd. A member of MUFG, a global financial group one hand, inflation risks remain elevated, with Brent crude holding above US$100/bbl, US retail gasoline prices staying above USD4/gallon, and agricultural commodity prices moving higher. Escalating tensions in the Middle East continue to threaten energy supply chains, with attacks on Saudi energy infrastructure and disruptions to key transport routes adding upside risks to oil prices. On the other hand, tighter monetary policy raises debt servicing costs for the US government and adds further strain on interest-rate-sensitive sectors such as housing.

CHART 1: MARKETS EXPECT THE FED TO DELIVER A 25BPS RATE HIKE

implied rate change, basis points DXY index 0.4 market implied fed policy rate change at Sep FOMC 104 DXY dollar index 0.2 102

Ahead Today 100 0 G3: US retail sales, import 98 price index, FOMC meeting -0.2 decision 96

1 Asia FX Talk │ 16 September 2026

Asian currencies weakened broadly against the US dollar as rising Treasury yields and elevated oil prices continued to dominate sentiment.

We remain cautious on the THB outlook. Thailand remains one of Asia's most vulnerable economies to sustained high oil prices given its heavy reliance on imported energy. Rising oil import costs, deteriorating terms of trade and weaker portfolio flows leave the baht exposed to further downside in our view.

We also remain cautious on IDR. Indonesia faces a complicated backdrop following another leadership change at the Finance Ministry, with Purbaya replaced by Deputy Finance Minister Nazara. Although Indonesia continues to benefit from relatively high commodity prices, Brent at above US$100/bbl presents a fiscal challenge through higher fuel subsidy costs and puts pressure on the trade balance. Maintaining the government's commitment to keeping the budget deficit below 3% of GDP may require additional expenditure restraint elsewhere.

FOREIGN EXCHANGE Asia % Chg London close 6pm New York close 5pm Close % Chg USDJPY INDU EURJPY NKY EURUSD DAX GBPUSD UKX USDSGD STI USDTHB SET USDMYR 4.0868 0.27 OTHER INDICATORS KLCI USDIDR 17691 0.24 DXY Curncy 99.615 JCI USDPHP 62.837 -0.04 PSEi USDINR GT2 Govt 4.664 SENSEX USDKRW GT10 Govt 5.003 KOSPI USDTWD 31.883 0.50 GTJPY2Y Govt 1.854 TWSE AUDUSD 0.7126 -0.06 GTJPY10Y Govt 3.034 AS USDHKD 7.8437 0.00 GTDEM10Y Govt 3.535 HSI USDCNY 6.7134 0.09 CO1 Comdty 108.75 SHCOMP USDVND 25988 0.05 XAU Curncy 4292.15 VNINDEX

FX estimated closing. % Chg & bps chg indicate daily changes versus prior trading day. Sources: Bloomberg * As of 4:30pm, Beijing Time

2 Asia FX Talk │ 16 September 2026