JPY and KRW leading Asian currencies
JPY and KRW outperform.
Group Research - Econs, Philip Wee9 Sep 2026
Article image
Photo credit: Adobe Stock Photo
Read More

We maintain our view that USD/JPY has peaked for this cycle, with the cross retreating towards 153 and JPY emerging as the strongest performing across all G10 and Asian currencies this week. Following the US-Japan coordinated market intervention in August, we argued that Treasury Secretary Bessent’s actions may be due to superior information arising from his communications with Japanese policymakers (see link). Our belief that US intervention reflects a high likelihood of meaningful Japanese policy shifts has been validated by subsequent developments. BOJ’s Takata raised the possibility of back-to-back rate hikes last week, while Japan’s GPIF (Government Pension Investment Fund) has unexpectedly called for a meeting in late Aug to discuss asset allocation, which could presage a reallocation from foreign to JPY assets. Overnight, Bessent has openly credited the success of his JPY market intervention to asymmetric information and challenged market participants to bet against him. Whether a new JPY appreciation trend has begun will depend critically on the policy guidance that BOJ delivers next Friday.

USD/KRW has eased towards lows around 1340, sustaining a largely uninterrupted decline since its peak in late June. We had been optimistic about KRW given a booming memory market and heavy investment pledges made by the Korean memory makers, but we now see scope for further gains to be lesser without a broad-based USD decline. For one, KRW undervaluation has narrowed so much that KRW pricing is now very close to its fair value, based on our DEER model.  Two, Korea’s National Pension Service (NPS) has also reportedly suspended its FX hedging operations. NPS has discretion to undertake tactical FX hedging for up to 15% of its foreign investments and has previously raised its FX hedging ratio amid a record KRW undervaluation.  Suspension of FX hedging now could be interpreted as a signal from the authorities to moderate expectations of further KRW gains.

The Middle East remains on the path of controlled escalation, with the US striking another 5 Iranian oil tankers in response to more attempted missile attacks on US Navy warships.  This follows earlier US strikes on 3 Iranian oil tankers in retaliation for a missile attack on a US aircraft carrier and destroyer. Periodic strikes are likely to continue, possibly to learn after carriers’ missile defenses. We are cautious of a further escalation and expect oil-sensitive Asian currencies such as INR, IDR and THB to underperform.

Chang Wei Liang

FX & Credit Strategist
weiliangchang@dbs.com



Subscribe here to receive our economics & macro strategy materials.
To unsubscribe, please click here.
Disclaimers and Important Notices

GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates, Digital Assets or Commodities)[1]

The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation.  Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies.  The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation.  The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.

[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.

DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E. 

DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability.  18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.

DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability.  11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.


[1] This disclaimer may not apply if the applicable assets fall within the definition of  'financial instruments' that are set out in Article 2(1) EU MAR (e.g. financial instruments that are traded on a regulated market, MTF or OTF, etc.). Section C of Annex I of MiFID2 specifies these 'financial instruments'.