Asian economies are rushing to defend their currencies against a strengthening US dollar that has spiked inflation and pressured consumer sentiment across the region.
The central banks of Japan, Indonesia and the Philippines — which all hold policy meetings this week — are expected to raise rates or keep rates elevated to rein in rising inflation and stabilize their weakening currencies.
These meetings will be held against the backdrop of a possible peace deal between the United States and Iran. Both sides have reached an interim agreement to reopen the Strait of Hormuz and will formally sign in Switzerland on Friday.
The US-Iran deal is good news for the global economy, but whether this sticks and remains viable depends, among other things, on the details of the negotiated terms, said Michael Wan, a senior currency analyst at the MUFG Bank in Tokyo.
"In a sustained scenario of reopening (the Strait of Hormuz), we think the risk-reward for the likes of currencies such as (the South Korean won) to do better moving forward is quite high," Wan said in his latest research note.
