APAC commodity currencies lead the way amid Russia-Ukraine war

Russia’s full-scale invasion of Ukraine was not priced in by markets and has led to spiralling commodity prices, higher risk premia, and strong demand for the USD. Asian foreign exchange (FX) markets have felt the combined impact of these developments.

What you will learn from this report:

• Currencies of large Asian commodity exporters (AUD, NZD, MYR) have substantially outperformed those of importers (INR, KRW, THB). We see these trends spilling over into Q2.
• Once market volatility subsides and the gentle weakening of the USD resumes, we expect the divergence to narrow and for most currencies to end the year stronger.
• One exception is the CNY, where we project a modest depreciation in H2 this year given China’s policy divergence with the US and other countries as the authorities stick to accommodative macroeconomic policies to bolster growth.