ASEAN-6 and India are preparing for higher energy prices and renewed inflation pressure linked to Middle East tensions. Central banks face a trade-off between limiting energy-driven inflation and supporting domestic growth.
The expected policy response depends on how much higher oil and gas costs pass through to local prices. It also depends on whether governments reduce subsidies or raise fuel prices, which can affect inflation directly and indirectly.
Singapore is described as having already tightened policy through the SGD NEER band. Fiscal policy is expected to act first in several markets before further monetary tightening.
If energy prices stay elevated, the Philippines and Vietnam are expected to lead interest rate rises. Indonesia and Malaysia are placed in a middle group, while Thailand and India are expected to tighten more slowly.
With Brent crude futures holding firm around $95 per barrel this month, we are seeing the familiar dilemma of energy-driven inflation pressure regional central banks. This situation is forcing a difficult choice between managing rising prices and supporting economic growth. How each country responds will create distinct opportunities for trading regional currencies and interest rates.
For the most aggressive policy moves, we are watching the Philippines and Vietnam. After Philippine inflation for March 2026 came in hot at 4.8%, and with Vietnam’s Q1 GDP surging at 6.5%, the pressure is building on their central banks to act first. Traders should position for potential interest rate hikes, which could translate to strength in the Philippine Peso and Vietnamese Dong through currency forwards or options.
Indonesia and Malaysia are taking a more balanced approach, caught between managing inflation and protecting their economies. Their currencies, the Rupiah and Ringgit, could experience volatility as markets weigh the central banks’ next moves, much like the pressure we saw during the Fed’s hiking cycle back in 2022. This uncertainty may be best traded through options strategies that profit from price swings rather than a specific direction.
In contrast, we expect Thailand and India to be the last to tighten policy. With Thai tourist arrivals still 15% below pre-2020 levels and India’s latest inflation reading of 5.2% still within the central bank’s tolerance band, neither is likely to raise rates soon. This suggests that their interest rate futures will likely underperform those in hawkish countries.
Singapore has already played its hand by re-centering its currency policy band higher late in 2025. This preemptive move means we should expect the Singapore dollar to remain relatively stable against its basket of trading partners. For traders, this makes the SGD a potential anchor or funding currency for trades against its more volatile regional peers.
