Asian Central Banks Shift Strategy to Prop Up Currencies, Turning to Foreign Capital Instead of Burning Reserves
MacroDigital Finance
Central banks in Asia's emerging markets are adjusting their strategies to cope with weakening currencies, increasingly turning to measures that attract foreign exchange inflows rather than relying solely on selling foreign reserves to intervene in markets. The Thai baht, Indonesian rupiah, and Indian rupee are among the five worst-performing currencies this year out of 22 emerging-market currencies tracked by Bloomberg. India has attracted nearly 40 billion dollars from overseas Indians through high-yield dollar deposit products. South Korea is pushing exporters to repatriate dollar earnings, leading the won to post its strongest monthly gain since 2022. Indonesia has drawn about 1.6 billion dollars in foreign capital into its bond market over the past two months. Meanwhile, foreign reserves of Indonesia, India, the Philippines, and Thailand have fallen by around 4 to 9 percent since the Iran conflict began. Analysts at MUFG Bank expect Indonesia and the Philippines may each raise interest rates twice this year, while South Korea could hike at least once more.
