Asia Local Markets Weekly: Shifting gears

Research evidence excerpt

Asia Local Markets Weekly: Shifting gears

Deutsche Bank

Research

Asia Fixed Income Date

Hong Kong 11 June 2026

Asia Local Markets

Weekly

Shifting gears

Sameer Goel

Central banks are shifting gears on FX defense, with a mix of carrot and stick

Macro Strategist

approach. Just this past week, the Korean authorities have launched investigations +65-642-36973

into unfair trading and speculative activities, and warned of the spillover from NDF

markets; Indian authorities have announced several measures to attract more Perry Kojodjojo

Strategist

foreign capital; and Indonesian authorities have done a surprise off cycle hike.

+852-2203-6153

Policy efforts in both India and Indonesia have included cheapening the cost of Vaninder Singh, CFA

currency hedging for offshore capital in an effort to reduce the short term imbalance Macro Strategist

in the BoP. We believe the math should work in both cases. The last time FX implied +65-6423 8947

12M SRBI, for example, yielded a pick up of around 120bp, we had seen average Bryant Xu

inflows of $3bn per month (May-August 2024), 3x the scale YTD in 2026. In India's Strategist

case, the experience from 2013 would suggest potential for well north of $50bn +65-6423 5558

under the two concessional FX swap window schemes announced by RBI. Joey Chung

A few key difference to note however: 1) in the tenor of money targeted, and hence +65-6423 8298

the rollover risk; 2) in the impact on local currency liquidity; and 3) in the potential Chen Kan

fallout on bond markets. The longer end in Indonesia is more at risk as BI steps back Macro Strategist

from its purchases; while in India, the improvement in both the economics (removal +852-2203-6159

of taxes) and ease (lowering the hurdles for Euroclear and/or Global Agg) of

Jalaj Singh