Higher oil prices and a firmer United States policy outlook have exerted significant pressure on Asian currencies, particularly the Korean Won (KRW) and Indonesian Rupiah (IDR), according to OCBC’s Sim Moh Siong. KRW weakness is described as flow-driven despite supportive macro fundamentals, with renewed verbal intervention from authorities and technical factors such as concentrated gains in AI-linked equities prompting rebalancing and foreign outflows. This technical drag is expected to cap KRW upside in the near term [1].
Bank Indonesia (BI) has responded to FX pressures by hiking rates 50 basis points to 5.25% in May, and economists anticipate another 50 basis points of cumulative tightening this year, with risks skewed toward further hikes. Despite these actions, USDIDR has continued to rise, moving above 18,000 last week, and BI has reportedly stepped up FX operations to support the IDR [1].
MUFG’s Hardman highlights that a sharp correction in South Korea’s AI-heavy equity market, dominated by Samsung Electronics and SK Hynic Inc, has contributed to selling pressure on the KRW. Foreign investors have been heavy sellers of Korean equities throughout the year. Following a stronger US jobs report, USD/KRW reached a high of 1,562.3 on Friday, but subsequently dropped by about 1.5% overnight after South Korean authorities announced emergency FX measures [2].
South Korea’s response plan includes tighter oversight of offshore currency derivatives, inspections targeting suspected market misconduct, and probes into potentially illegal foreign exchange transactions. These measures were announced after an emergency meeting with the Bank of Korea and financial regulators. The latest actions build on earlier steps, such as allowing the National Pension Service to expand FX hedging and easing rules to improve dollar liquidity [2].
CONCLUSION
Asian currencies, especially KRW and IDR, are facing sustained pressure from higher oil prices and a robust US policy outlook. South Korea has responded with emergency FX measures to stabilize the won, while Indonesia is expected to further tighten policy to contain FX risks. The market impact is high, with ongoing volatility and policy responses shaping the outlook for both currencies.