USD/CNY: CNY appreciation trajectory remains intact
• USDCNY continued to grind lower over the past month, reaching 6.71 at the time of writing, which is the lowest level since early 2023.
• The CNY has shrugged off widening US-China yield spreads, as market participants weigh the risks of CNY appreciation with the interest rate spreads. The main impetus for CNY strength continues to be exporter conversions, as China’s trade surplus remains massive. Rallies in the USDCNY have typically been sold into by exporters this year.
• We hold our 6.67-6.92 fluctuation band for 2H26, and risks remain tilted to the downside. A contrarian view: yield spreads might further widen if the Fed hikes and the PBoC cuts rates (the current ING forecast), and at some point it may draw CNY bears back into action.
Source: Refinitiv, ING Forecasts
USD/KRW: Sustaining a break of 1350 will be tough
• USD/KRW’s jaw-dropping decline continues, with the fall from the summer’s high now around 13%. This pair does occasionally have corrections of this magnitude – e.g. in 2022 – and we suspect a move below 1350 will be hard to sustain in the near term. This is especially so since we think the dollar can find some support from a Fed hike in September.
• But the medium-term trend looks to have shifted. Korean exporters now seem to have a lot more confidence in the won and the 3.00% policy rate looks attractive. This could be taken to 3.50% over the next six months, according to the Bank of Korea.
• Strengthening domestic demand on the chip boom clearly helps.
Source: Refinitiv, ING Forecasts
USD/INR: INR likely to stabilise at current levels
• GDP growth surprised on the upside in 2Q, rising by 7.8% YoY on the back of strong consumer demand, resilient exports, and robust public capital expenditure. While growth is likely to moderate in 2H, we still expect a healthy 7.1% expansion for the full year, reinforcing underlying support for the INR.
• Recent measures to attract FCNR deposits have exceeded expectations, generating inflows of more than USD125bn. These inflows should help swing the anticipated balance-of-payments deficit into a surplus of over USD50bn, while further strengthening the RBI’s FX reserve position.
• Foreign investment in Indian equities rebounded in July and August, providing an additional tailwind for the currency. We expect USD/INR to stabilise around current levels, supported by rising FX reserves and the RBI’s ability to manage market pressures, including a sizeable, short FX position.
Source: Refinitiv, ING Forecasts
USD/IDR: Under-performance in IDR to remerge
• IDR was Southeast Asia’s best-performing currency last month, supported by renewed foreign inflows into equity and bond markets and broad US dollar weakness. However, concerns over government policy, including greater intervention in the private sector, and the risk of a sovereign rating downgrade continue to weigh on sentiment.
• The broader external account picture has yet to improve. Weak FDI inflows and a widening current account deficit are likely to keep depreciation pressure on the rupiah. We therefore continue to expect Bank Indonesia to deliver one additional 25bp rate hike this year.
• Falling FX reserves and weakening reserve adequacy have reduced BI’s scope for aggressive FX intervention. While we are lowering our USD/IDR forecast to reflect recent IDR strength, we continue to expect depreciation pressures to re-emerge
Source: Refinitiv, ING Forecasts
USD/PHP: Weakening bias to persist for PHP
• The BSP raised rates by 25bp to 5.0% last month and delivered a hawkish message, lifting its 2027 inflation forecast amid concerns over El Niño-related food price pressures and stronger-than-expected wage growth.
• With inflation risks remaining elevated and core inflation yet to show convincing moderation, we continue to expect another 25bp rate hike in 4Q26, despite GDP growth continuing to surprise significantly on the downside in 2Q.
• Real policy rates are now close to historic lows, reducing the degree of monetary restraint. At the same time, interest rate differentials between the Philippines and the US have narrowed materially, limiting support for the peso. Peso stability could face additional pressure if the Fed delivers another 25bp rate hike as we expect.
Source: Refinitiv, ING Forecasts
USD/SGD: SGD should continue to outperform
• Singapore continues to benefit from robust AI-related investment and data centre activity, which is sustaining domestic demand and contributing to upward pressure on services inflation.
• While July’s inflation data undershot consensus expectations, the continued acceleration in both headline and core inflation, coupled with persistent upside risks from energy, food and domestic demand, suggests the MAS may not be done tightening.
• In July, the MAS surprised markets by increasing the slope of the SGD NEER policy band “very slightly”, signalling greater concern about inflation risks than investors had anticipated. As such, we believe the October policy meeting remains live and cannot rule out further modest policy tightening. We expect SGD to continue to outperform within the region.
Source: Refinitiv, ING Forecasts
USD/TWD: TWD appreciates as headwinds fade
• The TWD strengthened over the past month, with the USDTWD dropping from around 32.5 to 31.6, despite a relatively steady USD backdrop. With Taiwan’s peak dividend season passing, this removed a source of outflow pressure.
• Equity market inflows and exporter USD selling were the main sources of support for the TWD over the past month. Furthermore, the CBC looks increasingly likely to hike rates by year-end, perhaps as early as this month given the upside surprises in inflation.
• Looking ahead, we still hold an appreciation bias for the TWD in the medium term, but we’re looking for broadly sideways momentum in the short-term. We have pushed back the timeline for our TWD appreciation and now look for the USDTWD to end the year around 31.5.
Source: Refinitiv, ING Forecasts
Source: ING
