Asia Crumbles: Painful Baht Performance, Won and Rupee Drive Blood Pressure Up
Asia Crumbles: Painful Baht Performance, Won and Rupee Drive Blood Pressure Up
Jakarta, CNBC Indonesia - Asian currency movements over the past month have been battered during the Iran war. The rupee has fallen to an all-time low while the won has reached its lowest level in the past 17 years.
Since the Iran versus Israel and United States (US) war erupted on 28 February 2026 until the end of last week, Friday (27/3/2026), no Asian currency has been spared.
News regarding Asian currencies has been consistently negative. The Thai baht has the “honour” of being the worst-performing Asian currency, weakening by more than 5%.
For Thailand, its high dependence on oil imports has led traders to speculate on the impact of commodity fluctuations and capital outflows. The worsening situation is compounded by the strengthening US dollar, which once again threatens Asian currencies.
The strengthening US dollar is undoubtedly disrupting Asia’s development plans. The dollar, the greatest magnet for capital in history, is drawing funds from around the world, sucking away the wealth needed to finance budget deficits, maintain bond stability, and support equity markets. The Iran war is amplifying the dollar’s destructive nature.
Harvard economist Kenneth Rogoff told Asia Times that for Asia, rising energy commodity prices amid already weak exchange rates are extremely painful.
For Thailand, for instance, a weak baht might normally benefit exports and tourism, but not when global commodity prices are skyrocketing.
With the Strait of Hormuz nearly closed, investors are bracing for surges in oil and fertiliser prices, which will soon drive up food prices.
The Thai stock exchange has seen outflows of at least US$1.2 billion this month, the largest since February 2023, according to data from the Stock Exchange of Thailand.
Global funds have sold nearly US$800 million in Thai bonds in March. Jitipol Puksamatanan, a strategist at Finansia Syrus Securities, added that perceptions of the government not effectively handling the current economic situation are adding to investor concerns.
Not just in Thailand, signs of pressure are emerging across Asia. South Korea has set oil price caps as the won trades near its 17-year low, almost matching the 2008 global crisis lows.
In Japan, Prime Minister Sanae Takaichi’s government is considering subsidies to mitigate the effects of commodity prices across various sectors and reviewing the oil-related product ecosystem. The already weak yen has fallen another 2% this year, worsening the risk of inflation spikes.
“The Middle East conflict is disrupting commodity price and growth projections, with a new surge in consumer price inflation becoming a significant risk,” said Stefan Angrick, Japan economist at Moody’s Analytics.
Soaring oil and gas prices could push energy price hikes starting in March.
Angrick added that the yen’s depreciation is an additional concern. For now, uncertainty from the conflict has led the Bank of Japan to hold off on policy changes.
“Weak wage growth strengthens the case for patience,” he stated.
Economist Richard Katz, publisher of the Japan Economy Watch newsletter, added that the Iran war is complicating the situation for Bank of Japan Governor Kazuo Ueda.
“Both nominal and real wages this year will depend on how much the Iran war adds to inflation and reduces income at small and medium-sized enterprises, where most people work,” he said.
Capital Economics analysis states that longer energy disruptions will have a greater impact on economic activity, meeting the definition of a partial global recession for most, and driving a broader monetary tightening cycle.
China cannot avoid the impending economic impacts either. Although China may be more resilient, it is not immune to demand shocks.
In India, the rupee fell to an all-time low on Friday, breaching INR 94 per dollar.
Growing concerns over the energy crisis from the Middle East war have pushed the rupee towards its worst annual decline in over a decade.
India imports nearly 85-90% of its crude oil needs, making it highly vulnerable to high oil prices.
Foreign investors are withdrawing from Indian bonds and stocks at a record pace.
Foreign investors have net sold Indian stocks worth $12.14 billion since the war began, marking the largest monthly outflow in history.
Net bond sales by foreign portfolio investors via the Fully Accessible Route (FAR) reached INR 152 billion ($1.61 billion), the highest since the category was introduced six years ago.
Due to this shock, India’s central bank, the Reserve Bank of India (RBI), is expected to raise interest rates in the next 12 months.
“For India, the problem is that neither the government nor households currently have large financial buffers,” said Sanjay Mathur, head of economics for Southeast Asia and India at ANZ, in a note to Tradingview.
India has cut duties on petrol and diesel to protect consumers and curb inflation surges, and imposed windfall taxes on aviation fuel and diesel exports.
What About the Rupiah?
The rupiah exchange rate closed weaker against the US dollar (US) in the last trading session of the week, Friday (27/3/2026). In line with the strengthening US dollar in global markets.
Referring to Refinitiv data, the Garuda currency closed in the red zone with a 0.38% weakening to Rp16,960/US.Thismovementreversedfromtheprevioustradingday, Thursday(26/3/2026), whentherupiahmanagedtoclosewithaslight0.06.
Since the war erupted, the rupiah has already tumbled 1.18%. The rupiah’s weakening is not as deep as other Asian currencies because Indonesia’s financial markets were closed for quite a while due to Eid holidays.
This week, the rupiah has even strengthened by 0.88%.