id to its weakest since late March, and Indonesia’s rupiah hovered near record lows. Central banks can lean against the move by raising interest rates, but that doesn’t fully offset a jump in energy costs. Meanwhile, Fitch, a credit ratings firm, said it wouldn’t automatically downgrade Indonesia if its budget deficit rises above 3% because of war-driven effects – but investors still tend to punish currencies when fiscal worries build.
Why should I care?
For markets: Stocks can smile while currencies wince.
Equities and currencies don’t always agree. South Korea’s KOSPI extended a weekly winning streak on artificial intelligence enthusiasm and Taiwan’s market hit a record, yet several regional currencies weakened. Strategists at Societe Generale, a French bank, highlighted the Indian rupee, Indonesian rupiah, Philippine peso, and Thai baht as exposed because higher oil prices widen trade gaps for energy importers. When that happens, global investors often ask for a bigger cushion to hold those currencies.
The bigger picture: Energy shocks can delay rate cuts.
A weaker currency can make imports pricier, pushing up inflation through fuel, transport, and food. That can force central banks to keep borrowing costs higher for longer, even if growth is cooling – as the Philippines’ recent rate hike showed. Elsewhere, countries with low inflation still have to factor in costlier energy and a stronger dollar when setting policy. So the durability of the Middle East truce matters well beyond oil – it can shape inflation paths, interest-rate decisions, and cross-border capital flows across Asia.
