OCBC strategists Sim Moh Siong and Christopher Wong said Asian foreign exchange may give back gains from late Friday. This follows Iran’s renewed closure of the Strait of Hormuz, while the US dollar may pick up safe-haven demand.
High-beta Asian currencies are expected to lead the pullback, with KRW flagged as the main mover. The KRW had risen earlier after more positive developments.
Other Asian currencies, including TWD, INR, THB and PHP, may also weaken. The reasoning is their sensitivity to oil prices and broader risk sentiment.
Lower-beta currencies such as CNH and SGD may be less volatile. Even so, they may remain under pressure.
The note points to shifting geopolitics and ongoing ceasefire talks. It also points to two-way trading conditions.
The article was produced with the help of an artificial intelligence tool and reviewed by an editor.
We remember how the market reacted to geopolitical twists last year, specifically around this time in 2025 when tensions flared over the Strait of Hormuz. That period underscored how quickly Asian currencies retrace gains and the US Dollar catches a safe-haven bid. This pattern of heightened sensitivity to global risk remains a critical factor for us today.
The high-beta Korean Won is still leading regional pullbacks during periods of uncertainty, just as we saw in 2025. With the KRW/USD exchange rate recently touching 1,410, its highest point since that period of instability, traders should consider buying puts on the won. This provides a clear hedge against further risk-off sentiment driven by supply chain or geopolitical news.
Currencies sensitive to oil prices, like the Indian Rupee and Thai Baht, continue to show weakness. As Brent crude consolidates above $90 a barrel through April 2026, reflecting persistent geopolitical risk premiums, the pressure on these oil-importing economies is immense. We believe hedging currency exposure by going long oil futures remains a fundamentally sound strategy.
In this environment, the lower-beta Singapore Dollar and Chinese Yuan offer relative stability but are still pressured by broad dollar strength, with the Dollar Index (DXY) holding firm above 106. This supports derivative strategies like relative value trades, such as pairing a long position in the Singapore Dollar against a short position in the more vulnerable Korean Won. This approach allows us to capitalize on the performance gap between high and low-beta currencies.
The key lesson from the past year is that geopolitical fluidity argues for two-way trading strategies that benefit from volatility. With implied volatility in major Asian currency pairs remaining elevated, using option straddles on pairs like USD/KRW is attractive. This allows traders to profit from a significant price move in either direction, which is ideal when headline risks can shift market direction without warning.
