Emerging Asia Adopts New Currency Defenses Amid Rising Volatility

Emerging Asian central banks are adopting new strategies to support their currencies without depleting foreign-exchange reserves, as regional policymakers navigate a landscape of heightened volatility and uncertainty.

The recent recovery in India's rupee from a record low in May has been underpinned by nearly $40 billion in high-yield dollar deposits from the country's diaspora. South Korea has also seen its won strengthen with corporate dollar repatriation efforts yielding significant gains.

Indonesia, meanwhile, drew in $1.6 billion in bond inflows over the last two months after offering incentives to foreign funds. Taiwan has instructed exporters to sell US dollars during periods of currency weakness.

Analysts say these measures reflect a broader effort by policymakers to supplement traditional tools like interest-rate hikes and foreign-exchange intervention, which have been insufficient to address currency weakness in the face of recurring Middle East tensions and higher US interest rates.