Asia FX Weekly Focus on Asian central bank meetings

Focus on Asian central bank meetings

LIN LI, PhD Head of Global Markets Research Asia Asian markets face a week dominated by monetary-policy decisions and inflation Global Markets Research releases next week. Market expects the Bank of Korea to deliver a consecutive Global Markets Division for Asia 25bp hike to 3.00% on rising core inflation, surging semiconductor exports and E: memory prices, coupled with a buoyant housing market. While BOK with a tightening bias, uncertainty on Korea’s growth and the longevity of AI boom MICHAEL WAN remains, the probability of delaying rate hike into Q4 is there, in our view. Senior Currency Analyst Meanwhile, we think the BSP will hike by 25bp to 5.00%, but the key for FX Global Markets Research markets could also be the tone and whether the central bank signals a more Global Markets Division for Asia dovish stance with recent softer than expected GDP. By contrast, the Bank of E: Thailand is expected to hold at 1.00% amid contained inflation and demand. Hawkish policy guidance will support KRW and PHP, while we think THB could be LLOYD CHAN a preferred funding currency in the region given a still dovish central bank. Senior Currency Analyst Across Asia, data will test how the energy shock and weaker global demand are Global Markets Research feeding into prices and activity. Singapore CPI is forecast to accelerate to Global Markets Division for Asia 2.7%yoy, while Australian inflation is expected to ease to 3.6%yoy, remaining E: above the RBA’s target range. India’s industrial-production growth should remain KHANG SEK LEE resilient at around 6%yoy. Associate In China, July industrial-profit growth is projected to moderate from June’s 15.1%yoy, with resilient technology earnings partially offsetting softer production Global Markets Research and weakness outside high-tech sectors. Global Markets Division for Asia E: Outside Asia, the main event will be Fed Chair Kevin Warsh’s inaugural speech at Jackson Hole, which takes even more significance amidst the Bessent’s treasury buyback operations. On the data front, the release of the second estimate of US Q2 GDP alongside July personal income, spending and PCE inflation will also be key. The report could shape expectations for Fed policy with implications for Treasury yields, the dollar and Asian currencies. Europe’s lighter calendar shifts attention to German activity indicators. Overall, markets will remain sensitive to 21 August 2026 whether oil-driven price pressures are becoming embedded in underlying inflation as Asian central banks balance currency stability against uneven growth. MUFG Bank, Ltd. A member of MUFG, a global financial group HIGHER US YIELDS AND ASIAN CURRENCIES HAVE DIVERGED ESPECIALLY OVER THE PAST 1-2 YEARS

FX views Asian FX performance is expected to remain differentiated, with domestic policy settings and sensitivity to energy prices driving relative moves. KRW and PHP could outperform if the BOK and BSP deliver the expected 25bp hikes and maintain hawkish guidance, supporting carry amid persistent inflation pressures, or vice versa. JPY may also find support from firmer Tokyo inflation and expectations for an October BOJ hike. In contrast, THB should remain vulnerable as the BOT stays on hold amid softer growth, while INR faces some headwinds from uncertainty around oil prices.

The big macro theme for Asia FX and rates has been the spillover from higher US yields and rising global term premium. Importantly as we have highlighted in our reports, why US yields are rising matter just as much as whether they have. On that front, we note a divergence in the relationship between higher US yields and Asian currencies, in part because US Treasuries have also been driven higher by term premia. We will monitor Fed Chair Warsh’s Jackson Hole address closely next week for greater clarity on the Fed’s reaction function and the resultant spillover impact to global and Asia FX and rates markets.

THE SOUTH KOREAN WON WAS THE STANDOUT PERFORMER

Index Dollar Index USD/KRW 115 1,540

95 1,240 Sep-23 Apr-24 Nov-24 Jun-25 Jan-26 Aug-26

FX PERFORMANCE Country / Region Currency Index 21-Aug %WTD %MTD %QTD %YTD %2025 %2024 %2023 China USDCNY Hong…