OCBC strategists Sim Moh Siong and Christopher Wong note most Asian FX have firmed, led by MYR, THB and TWD, helped by Iran’s proposal on Hormuz. However, elevated Oil prices and constrained energy passthrough pose risks to demand and could restrain high‑beta, Oil‑sensitive Asian FX. They expect differentiated performance, with PHP and THB under pressure and SGD and MYR relatively resilient.

High beta currencies face oil headwinds

“Most Asian FX traded on a firmer footing, led by gains in MYR, THB, TWD. Iran’s proposal to reopen Hormuz may have helped with de-escalation but it remains to be seen if US will agree to the conditions including the postponement of nuclear talks to later time.”

“While equities are near record highs, oil prices also remain elevated. Energy passthrough in the Hormuz strait remains constrained and oil prices staying higher for longer can have negative repercussions on demand. “

“The longer the standoff between US and Iran, the tighter the oil market, and oil prices will have to be repriced higher. Ultimately this can restrain Asian FX’s recovery momentum, especially for high-beta and oil-sensitive Asian FX. “

“That said, geopolitical developments remain fluid. Any signs of further de-escalation, alongside oil prices easing should see Asian FX benefiting. Until this happens, Asian FX may continue to trade differentiated due to respective oil sensitivity, current account positions, foreign flows dynamics and central bank reaction/policy functions.”

“Given the impasse and still-elevated oil prices scenario, PHP, THB may stay under pressure while SGD and MYR should retain relative resilience.”

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