Asia Economics Comment Exchange rates and monetary policy

Research evidence excerpt

Asia Economics Comment Exchange rates and monetary policy

8 June 2026

Asia Economics Comment Economics

Exchange rates and monetary policy Asia

The pressure is building. With the US dollar on the move against many Asian currencies, monetary Frederic Neumann

Chief Asia Economist, Co-head

officials are paying close attention. Even where inflation is relatively well behaved, at least for now, Global Research Asia

exchange rate pressures increasingly warrant monetary tightening. Other measures, like FX The Hongkong and Shanghai Banking Corporation Limited

intervention or regulatory tweaks, have their uses, of course, but the likely persistence of the fredericneumann@hsbc.com.hk

+852 2822 4556

energy price shock, the ripples from the AI boom (recent jitters notwithstanding), and the hawkish

tilt of monetary policy in the West point towards the need for monetary officials in many Asian

economies to be nimbler in tightening monetary policy outright. After all, the longer policy rates are

left unchanged, the more they may need to rise later.

Asia’s economies have proven remarkably resilient in the face of recent shocks, above all the energy crisis

that affects them especially hard.

For example, inflation, while drifting up, has largely remained manageable, largely thanks to subsidies and

price controls. There are exceptions, of course: in the Philippines, price pressures have soared, and the

central bank duly responded by tightening monetary policy. In Australia, price pressures have long been

more elevated as well, which led the RBA to raise interest rates earlier this year.

Across much of Asia, however, exchange rates remain under pressure, and that increasingly warrants a

monetary policy response – even if inflation targets have not yet been breached, or only narrowly so.