Asia's currencies are flashing oil shock alarm

Asia’s currencies are under acute pressure from a Middle East-driven oil shock, prompting central banks and governments to take urgent, sometimes unconventional steps to defend exchange rates. Indonesia surprised markets with a 50-basis-point rate hike and export controls to keep proceeds onshore; India is reportedly spending about $1 billion a day and has large short forward dollar commitments, while the Philippines has already tightened policy. The stress has pushed the rupiah and rupee to record lows, amplified capital outflows, and lifted expectations for further Asian rate hikes — a dynamic that supports a stronger U.S. dollar and puts upward pressure on USD/JPY. Markets are increasingly favoring relative-value FX trades into stronger Asian currencies (e.g., SGD, CNH) and away from vulnerable ones (rupee, rupiah, baht), raising risks to growth and reserves across the region.