Asia Currencies Diverge: Won, Yuan Gain as RBA, Bank Indonesia Hike Rates

Asia's Currency Split

Asian currencies have shown significant divergence this year, according to an economic letter from Login Asia dated 12 October 2026. The South Korean won (KRW) and Chinese yuan (CNY) recorded substantial gains on a trade-weighted basis, with the Australian dollar (AUD) also strengthening.

Conversely, the Philippine peso (PHP), Thai baht (THB), Indian rupee (INR), and Indonesian rupiah (IDR) have lost considerable ground. Currencies like the Singapore dollar (SGD), Malaysian ringgit (MYR), Japanese yen (JPY), and Taiwan dollar (TWD) saw more modest movements, staying within a 2% range in either direction.

Central Banks Tighten Policy

Several Asian central banks have tightened monetary policy this year. The Reserve Bank of Australia (RBA) increased its policy rate four times, reaching 4.60% by September, citing persistent core inflation and capacity pressures.

Bank Indonesia (BI) cumulatively raised its policy rate by 100 basis points (bp) in May and June to 5.75%, aiming to stabilise the rupiah amidst Middle East conflict volatility. The Reserve Bank of New Zealand (RBNZ) added 50 bp since July, following a 4.1% year-on-year (y/y) headline inflation rate in Q2 2026.

Most recently, the Reserve Bank of India (RBI) lifted its repo rate to 5.50% on 7 October, marking its first hike since February 2023.

Real Rates and Yield Dynamics

Despite these tightening measures, real policy rates remain slightly negative in half of the region's economies, including the Philippines, Thailand, and New Zealand, indicating an accommodative stance in real terms. Indonesia, however, maintains a positive real rate of approximately 2.5%. Real bond yields have also climbed in Japan, Korea, and Australia.

This trend suggests that factors beyond inflation expectations, such as increased government spending, the AI-driven export boom, and tighter policy settings, are influencing bond markets.

Future Market Influences

Yield differentials only partly explain the observed currency movements; for example, the Philippine peso fell about 6% even as its 10-year spread over US Treasuries widened by 1 percentage point.

Looking ahead, a strengthening El Niño, disruptions in the Strait of Hormuz, the ongoing AI infrastructure buildout, and risks of renewed US-China friction are expected to shape Asia's fiscal and monetary planning.

For businesses and investors, these external developments, alongside domestic policy shifts, will directly influence operational costs, supply chain stability, and investment flows across Asian markets. Monitoring their evolution, particularly for energy prices, trade routes, and tech sector growth, will be crucial in the period ahead.