Asian currencies are in freefall amid escalating geopolitical tensions in the Middle East and continued disruptions in the strategically vital Strait of Hormuz. The currencies have come under severe pressure since the US-Iran war began on February 28, triggering sharp depreciation across major Asian economies.
The ripple effect has forced several nations to impose austerity measures and curtail imports of essential commodities in a bid to control inflation and support their domestic currencies.
Japan, one of Asia’s largest economies, has seen its yen depreciate by nearly 4 per cent despite repeated interventions by the Bank of Japan.
India is among the worst affected, with the rupee losing nearly 6 to 7 per cent of its value since the conflict erupted. The sharp fall prompted Prime Minister Narendra Modi to announce austerity measures aimed at easing pressure on the currency and conserving foreign reserves.
South Korea’s won has also weakened significantly, falling by around 7 per cent since late February, despite the country’s otherwise strong economic indicators.
Indonesia’s rupiah has emerged as one of the worst-performing currencies in the region, depreciating by nearly 8 per cent amid the ongoing crisis.
The situation across Asian economies remains precarious, and the coming weeks could prove critical if hostilities between the US and Iran persist.
While India is somewhat insulated due to its foreign exchange reserves, which can support the economy for nearly 11 months, experts stress the need for a comprehensive financial action plan, particularly to attract higher foreign direct investment.
Meanwhile, according to the latest estimates, Iran has lost nearly $6 billion in oil revenues as the US maintains its naval blockade on Tehran.
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