Asia's Foreign Exchange Reserves Depleted: China Hit Hardest, Indonesia Not As Bad

The war between the United States (US)-Israel and Iran, occurring from late February to early April 2026, has not only shaken global energy prices but also added burdens to central banks worldwide, including those in Asia.

Rising geopolitical tensions have prompted market players to seek the US dollar as a safe-haven asset, in turn increasing the room for currencies of other countries, including those in Asia, to weaken against the greenback.

Amid this situation, central banks in various Asian countries have been working harder to maintain the stability of their exchange rates. These stabilisation efforts have come at a costly consequence: the erosion of foreign exchange reserves.

According to reports from central banks of several Asian countries that have disclosed their latest reserve conditions, particularly for March 2026, there is a commonality: a decline in reserves.

China Hit the Hardest

Among Asian countries, China recorded one of the largest reserve declines in March 2026. Reserves reported by the People’s Bank of China fell by around US$86 billion over the course of one month.

From US$3.423 billion in February to US$3.342 billion in March. This decline also marks the sharpest drop in China’s reserves in the past decade.

This pressure aligns with the strengthening of the US dollar during the Middle East war. As the dollar surges, the valuation of reserve assets in the form of US government securities, gold, and other foreign exchange assets is affected in dollar terms.

Interestingly, China’s gold stock continued to increase during this one-month war period. However, the rise in gold volume was not sufficient to offset the overall decline in foreign exchange reserves.

India Drops by More than US$10 Billion

India also recorded a substantial decline. Its foreign exchange reserves fell from US$698.35 billion to US$688.06 billion, a shrinkage of about US$10.29 billion.

For India, this drop occurred after previously reaching a new high in February 2026. Thus, the US-Iran war and global market turmoil directly cut into the external buffer that had strengthened at the start of the year.

Japan’s Reserves Also Eroded

Besides China and India, a decline in foreign exchange reserves also occurred in the Land of the Rising Sun. Japan’s reserves decreased by US$36 billion to US$1,374.7 billion in March 2026 from US$1,410.7 billion previously.

This decline emerged amid growing attention from Japanese authorities to the weakening yen. The government and monetary authorities in Japan during that period also signalled readiness to act if exchange rate volatility was deemed excessive.

South Korea Also Utilised for Market Stability

South Korea’s foreign exchange reserves also fell from US$427.62 billion in February to US$423.66 billion in March. This means a shrinkage of about US$3.96 billion in one month.

The Bank of Korea explained that the decline was influenced by the fall in value of assets in currencies other than the US dollar, as well as market stabilisation measures. One highlighted aspect is the use of foreign exchange swap schemes with the National Pension Fund.

This shows that it is not only direct intervention in the spot market that central banks rely on. In highly volatile situations, authorities can also use other instruments to maintain liquidity and reduce pressure on exchange rates.

Philippines and Malaysia’s Reserves Also Depleted

The Philippines became one of the Asian countries recording a significant decline. Its foreign exchange reserves fell from US$113.3 billion in February to US$107.5 billion in March, a reduction of US$5.8 billion.

This decline is notable as it occurred right after the Philippines recorded a record high in foreign exchange reserves in February 2026. Thus, external pressures in March can be said to have directly erased part of the strong achievement from the previous month.

Malaysia also experienced a decline in foreign exchange reserves, though on a more limited scale compared to some other countries. The reserve position fell from US$128.3 billion to US$126.6 billion, a reduction of about US$1.7 billion.

Singapore Becomes the Exception

Amid the downward trend in many Asian countries, Singapore became the exception. Its foreign exchange reserves rose from SGD526.249 billion in February to SGD540.853 billion in March, an increase of about SGD14.604 billion.

This rise made Singapore’s foreign exchange reserve position the highest since February 2022. The increase occurred in almost all components, from gold and foreign currency to reserve positions at the IMF and special drawing rights.

However, one important point to note is that Singapore’s data is reported in Singapore dollars, not US dollars like the majority of other countries.

What About Indonesia?

Indonesia was also not spared from this pressure. Indonesia’s foreign exchange reserves fell from US$151.9 billion in February to US$148.2 billion in March 2026. This means a decline of about US$3.7 billion in one month.

This position became the lowest since July 2024. The decline was primarily driven by Bank Indonesia’s steps to stabilise the rupiah amid high global market volatility.

Although down, Indonesia’s foreign exchange reserve position remains relatively strong. The amount is equivalent to financing 6.0 months of imports, or 5.8 months of imports and government external debt payments. This figure is still well above the international adequacy standard of around three months of imports.

Thus, although the US-Iran war is pressuring financial markets and prompting Bank Indonesia to actively safeguard the rupiah, Indonesia’s external buffer remains sufficiently thick. The challenge now is whether this global pressure will truly ease after the conflict enters a ceasefire phase, or instead reignite and force central banks to deplete reserves even further.