Week Ahead FX outlook:
Key FX views:
FX weakened against the US dollar this week, with THB, KRW and PHP among the worst performers, reflecting USD strength and domestic vulnerabilities. The key driver was elevated US yields and a firmer dollar, reinforcing negative carry and triggering outflows from higher‑beta currencies. KRW led declines due to its sensitivity to risk appetite and the tech cycle, with semiconductor equity weakness amplifying losses. THB also softened given its cyclical exposure, as tourism inflows remain insufficient to offset external headwinds. Meanwhile, PHP underperformed on its reliance on external funding, the high-for-longer US yield weighted on the currency despite oil-related support this week.
Looking ahead, next week, the macro calendar turns lighter on central bank decisions but remains data‑heavy and still market‑moving, with a clear pivot toward US labor indicators and selective regional releases. Markets are likely to rely more on data surprises rather than policy announcements as catalysts for moves in rates, FX and equities. Asian FX could remain under pressure, should firm US inflation and labor data drive Fed expectations and yields, and reinforce the “high(er)‑for‑longer” narrative, keeping the USD supported and pressuring Asian currencies including THB, KRW and PHP. In Asia, focus instead remains on inflation prints, activity data, and cyclical indicators, including CPI releases in parts of ASEAN and ongoing monitoring of China macro conditions, such as PMIs signals, crucial for cyclical FX such as KRW. A stabilization in China may provide a floor, while weaker data would renew depreciation pressure.
The near-term outlook for the tech sector remains constructive but more volatile. Strong AI-driven investment and earnings momentum continue to provide support, but elevated valuations and shifting rate expectations are driving rotation and leaving performance increasingly uneven – this would translate into a potential volatile KRW and TWD in near term too. Crude oil prices declined as the US and Iran reached an interim peace framework deal which helps to de-escalate the conflict and restore oil flows. Returning supply, low inventory and still fragile geopolitical situation likely in near term keep oil prices rangebound, and headline‑driven – this would reduce the trend pressure on oil importers but may imply increase of sudden price jumps for Asian FX depending on events.
