Asia's trade-sensitive currencies fluctuate amid ongoing tariff turmoil

Asia’s trade-sensitive currencies fluctuated near multiyear lows as the region struggles with US President Donald Trump’s tariff policies, which threaten to drive the global economy into recession.

The Bloomberg Asia Dollar Index remained close to an all-time low in data available since 2006. The Korean won dropped to its lowest point since the global financial crisis, whereas the Australian and New Zealand dollars decreased to levels unseen since March 2020 before bouncing back. The Indonesian rupiah hovered close to its lowest point ever, whereas the offshore Chinese yuan recovered from an all-time low as Beijing eased its control on the currency to bolster the economy.

The fluctuations in Asian markets arise as traders worry about tariff news, concerned that a worsening US-China trade war will impact global growth. Trump has promised additional actions if nations respond to his tariffs. South-east Asian assets have faced the greatest impact from the sell-off, with the Indonesian rupiah and Thai baht ranking as some of the poorest-performing currencies this year.

Vietnam, Indonesia, and other countries have sent trade teams to the US to strike agreements and committed to eliminating certain import restrictions. Treasury Secretary Scott Bessent mentioned that Japan will be given top priority in any discussions. A measure of Asian currency fluctuations has surged to the peak seen since Trump's election in November.

“The delay in WGBI index inclusion could reinforce some of the negativity on the won in the near term, but we do not expect it to be sustained,” Barclays strategists, including Mitul Kotech, a wrote in a note. Risks are skewed to the currency weakening towards 1,500 per US dollar before a trade deal gives incremental support, they wrote.

In Indonesia, investors are already concerned about President Prabowo Subianto’s populist policies and their effects on economic growth. The US ranks as one of Indonesia's major trading partners, and a 32 percent tariff is poised to impact crucial industries like textiles, electronics, and palm oil.