Asian FX: Higher US yields keep regional currencies under pressure - MUFG

MUFG’s Lloyd Chan highlights that the firm US Dollar, high US Treasury yields and elevated Oil prices are weighing on Asian FX. The Indian Rupee, Indonesian Rupiah and Thai Baht are seen as particularly vulnerable. MUFG discusses RBI’s FX measures, Indonesia’s sensitivity to outflows, and maintains end-2026 forecasts for USD/IDR and USD/THB.

INR, IDR and THB seen vulnerable

"For Asian FX, the firm US dollar, along with still elevated US Treasury yields and oil prices, added to depreciation pressure across several regional FX, with the INR, IDR and THB possibly much more vulnerable."

"That said, RBI’s recent FX measures to curb speculations on the rupee may help temper downside pressure on INR, although higher crude prices remain a headwind."

"In Indonesia, elevated US yields weaken the relative appeal of Indonesian assets and leave the rupiah sensitive to foreign portfolio outflows; we reiterate our end-2026 USD/IDR forecast of 18,350."

"THB also remains sensitive to the stronger US dollar and higher oil prices, which together raise the cost of Thailand’s energy imports and weaken the terms of trade. We maintain our end-2026 USD/THB forecast at 34.10."