Oil prices have now exceeded $100 per barrel, while US 10-year Treasury yields reached 5%—a level not seen in three years. This dual development is causing sharp differences in how Southeast Asian currencies react, with some maintaining stability while others weaken against the dollar.
The most recent oil price surge followed drone strikes on Monday (Sep 14) by Iran-backed Houthis, which knocked out a key Saudi Arabia pipeline bypassing the closed Strait of Hormuz, while planned talks between Gulf Arab states and Iran were postponed. Brent crude traded above $105, and West Texas Intermediate approached $101. Simultaneously, rising US Treasury yields signal ongoing inflation concerns and strong borrowing demand, driving investors toward dollar-backed assets and tightening financial conditions worldwide.
Among ASEAN economies, responses differ significantly. Singapore’s dollar, Malaysia’s ringgit, and Vietnam’s dong have shown greater resilience than others in the region. Singapore has benefited from durable balance of payments surpluses, strong foreign direct investment (FDI) inflows, and artificial intelligence-driven export tailwinds, alongside proactive monetary tightening by the Monetary Authority of Singapore. Malaysia, as a net oil and gas exporter, has seen its trade surplus cushioned by higher energy prices. Meanwhile, Vietnam’s dong is anchored by persistent FDI and passive fund inflows ahead of its FTSE Russell secondary emerging market reclassification on Sep 21.
In contrast, the Philippines, Thailand, and Indonesia are experiencing more significant pressure. All three nations import substantial amounts of oil, and climbing fuel costs have widened their trade deficits. The Philippines and Thailand have seen current account positions deteriorate under rising import bills. The Philippines has also grappled with weak portfolio investor appetite amid domestic governance challenges, while Thailand’s acute current account pressures are only partially offset by post-election FDI interest. Indonesia’s rupiah, while weighed down by a wider second-quarter current account deficit, has shown signs of stabilising due to capital inflows into debt instruments and Bank Indonesia Rupiah Securities.
Experts emphasize that the length of raised oil prices will be more significant than the initial rise. A short-lived spike is easier to handle, but sustained high prices, particularly when paired with higher US yields and a stronger dollar, could deepen currency disparities across the region.
Central banks within ASEAN may have limited options to address these challenges. While some, including Singapore’s Monetary Authority, have already adjusted policies, others face restrictions. Domestic inflation concerns could force policymakers to focus on maintaining price stability over supporting their currencies. Additionally, supply disruptions, such as those caused by El Niño-related agricultural and energy shortages, could keep inflation raised, making monetary decisions more difficult.