Asia is facing a shock from crude oil prices that have risen more than 40% since the war began in late February, prompting central banks across the region to accelerate efforts to defend their currencies and stem capital outflows.
“Monetary tightening is increasingly being used as a tool to fight inflation and slow currency depreciation,” said Wee Khoon Chong, senior Asia-Pacific market strategist at BNY.
The BNY analyst also said the latest moves indicate that “rate hikes are becoming a regional response trend” rather than an “occasional measure”, adding that markets are watching how the central banks of India and South Korea respond to recent currency weakness.
The Indonesian rupiah, Indian rupee and Philippine peso are among the emerging-market currencies that have weakened the most, falling by 4.5%-6.5% since the war began, while the Sri Lankan rupee has weakened by about 4%.
In addition to rate rises, policymakers across Asia are using emergency measures to stabilise currencies and protect foreign-exchange reserves. Indonesia has announced a plan to centralise strategic commodity exports to support the rupiah, while Sri Lanka has sharply increased car import taxes, introduced fuel rationing and raised electricity tariffs to defend the rupee.
