Asia FX: Oil shock keeps tone cautious – OCBC

OCBC’s Christopher Wong expects Asia ex-Japan (AxJ) currencies to start the week on a selectively cautious footing after renewed US–Iran tensions lifted Brent above US$96. Elevated Oil and US Treasury yields are seen as headwinds for net energy importers, even as softer Dollar follow-through and domestic buffers support differentiation. A light regional data calendar centres on China trade, inflation and credit releases.

Energy risks and light China data calendar

"AXJ FX is likely start the week on a cautious footing following renewed US-Iran escalation over the weekend, including strikes involving oil tankers near key Iranian export routes. Brent ended last week above US$96/bbl and any further disruption to shipping through the Strait of Hormuz could put renewed upward pressure on crude."

"This risks an unfavourable backdrop for much of AXJ given the region’s dependence on energy imports and may restrain the extent of FX appreciation even if the broader USD stays contained."

"We would therefore expect a more cautious and differentiated start to the week, with oil-sensitive AXJs, including PHP, THB potentially lagging while markets continue to assess the extent and duration of the supply disruption."

"Week’s AXJ data calendar is relatively light and centred on China trade, inflation and credit data. China August trade (8 Sep) will be watched for whether export momentum is holding up, while imports should provide a read on whether tech-linked demand remains firm."

"China CPI/PPI (9 Sep) and credit data due between 9–15 Sep will matter more for the domestic-demand story, particularly whether pricing power and credit appetite remain soft."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)