Asian FX: Energy shock risks weigh on regional currencies – MUFG

MUFG’s Senior Currency Analyst Lloyd Chan highlights that Asia is highly exposed to potential energy flow disruptions through the Strait of Hormuz. An extended energy shock would raise inflation, worsen current accounts and hurt growth, leaving KRW, PHP and THB vulnerable. In contrast, CNY is seen as relatively insulated, with its resilience expected to lend some support to MYR given their close co-movement.

Energy disruption threatens regional FX

"For Asia, prolonged disruptions to energy flows through the Strait of Hormuz would be particularly damaging."

"An extended energy shock would raise inflation risks, worsen current account dynamics, and weigh heavily on regional growth prospects."

"Currencies such as KRW, PHP, and THB are likely to stay vulnerable, while CNY remains relatively insulated."

"By contrast, CNY should stay relatively resilient, underpinned by higher energy self- sufficiency rate and sizeable strategic reserves."

"This resilience should, in turn, help support MYR, which tends to move in tandem with CNY and continues to benefit from strong domestic fundamentals."

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