Asian currencies are coming under renewed strain as the Iran war pushes oil higher and investors reassess the region’s exposure to imported energy. The Indian rupee, Indonesian rupiah and Philippine peso have all weakened sharply, with analysts warning that economies reliant on overseas fuel supplies are feeling the shock first and hardest, according to Reuters-style accounts and market reports.

For India and Indonesia, the pressure is especially acute because both countries run persistent external vulnerabilities and depend heavily on imported crude. As oil has surged above $120 a barrel, central banks have been left trying to contain inflation, steady capital flows and prevent a more damaging sell-off in their currencies, while also avoiding a sharper hit to growth.

In India, the Reserve Bank has been using its foreign-exchange reserves and tighter controls on forward-market activity to slow the rupee’s slide, while also asking banks to rein in dollar exposure. The currency has continued to probe record lows, underscoring how difficult it has become to defend the exchange rate without draining policy ammunition.

Indonesia’s authorities face a similar dilemma. Bank Indonesia has signalled that it is prepared to tighten policy further if needed, even as investors sell local bonds and the rupiah weakens towards levels last seen during the Asian financial crisis. That leaves policymakers balancing currency stability against the risk of choking off already fragile domestic demand.

The wider backdrop is a region where the Strait of Hormuz matters enormously. Recent analyses have highlighted that a large share of Asia’s oil arrives through the chokepoint, making the region unusually exposed to any prolonged disruption. That vulnerability is now showing up in exchange rates, with traders increasingly pricing in the risk that several Asian currencies may need to absorb more of the shock if the conflict drags on.

Japan has not been spared. The yen has swung sharply as authorities signalled they may step in to curb disorderly moves, with officials saying decisive action could be necessary. But currency strategists caution that intervention alone rarely changes the broader trend unless the underlying drivers, including the dollar’s strength and energy costs, also begin to ease.

More broadly, economists say the region is now confronting a familiar but more dangerous mix: imported inflation, capital outflows and pressure on fiscal accounts. The concern is not only that weaker currencies make oil more expensive, but that the feedback loop between energy costs, inflation and growth could deepen if the war persists, leaving Asian policymakers with fewer good options than they had at the start of the crisis.

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Source: Noah Wire Services