Across Asia, currencies are buckling under the weight of expensive oil, money flowing out of local markets, and a dollar that refuses to ease, and the region's central banks have begun turning toward the trades that take place beyond their own borders. South Korea, the Philippines, and India have each tightened their grip on offshore currency derivatives, while Indonesia has surprised markets with an unexpected rate rise. Yet the old lesson remains: speculation often grows where local rules are tight, and no fence can fully substitute for sound economic footing. The coming weeks will reveal wh
Asian Central Banks Move to Curb Offshore Currency Speculation as Oil Shock and Strong Dollar Bite
Offshore contracts are where the stress shows up first
Mark
Why are central banks going after offshore trading at all? Isn't the problem oil and the dollar?
Mimi
Both are true. Oil and the dollar are the cause of the stress, but offshore contracts are where the stress shows up first and can spill into local markets. Regulators can reach that channel more easily than they can reach oil prices.
Mark
How big is that channel?
Luke
Globally, small. Deutsche Bank puts NDFs at about 4% of a $10 trillion daily market. In Asia the weight is larger because of convertibility limits, but the article gives no regional figure.
Mimi
And that's the point. Goh says NDFs exist because of onshore restrictions. Ease those and the offshore market fades, as with the Singapore dollar and Thai baht.
Mark
Yet central banks are intervening offshore themselves.
Mimi
Yes. Traders say the RBI's short dollar book has likely reached around $115 billion, and Bank Indonesia has sold dollars overseas. Reserves are falling as a result.
Luke
Note the wording: "traders say" and "likely." That $115 billion is an estimate, not a disclosed figure.
Mark
So will the curbs work?
Mimi
Wan at MUFG says they may help but fundamentals must shift. Outflows are heavy: $30 billion from Indian stocks, over $78 billion from Korea's.
Luke
Whether offshore trading or domestic weakness matters more is disputed, and the reporting doesn't settle it. Rate hikes are Venkateswaran's expectation, not a decision.
Der Puls
- The rupiah has broken past 18,000 per dollar, and the won has sunk to levels not seen since the global financial crisis.
- Oil prices surging from the US-Iran conflict are squeezing energy-importing economies just as capital streams out of their markets.
- Regulators are tightening limits on banks' open positions and demanding that offshore hedging serve real economic purposes.
- Central banks are quietly selling dollars to hold the line, draining reserves that may not last long.
- Analysts warn the curbs alone cannot reverse the trend, and markets are watching for rate hikes in India, the Philippines and Indonesia.
Across Asia, currencies are buckling under the weight of expensive oil, money flowing out of local markets, and a dollar that refuses to ease, and the region's central banks have begun turning toward the trades that take place beyond their own borders. South Korea, the Philippines, and India have each tightened their grip on offshore currency derivatives, while Indonesia has surprised markets with an unexpected rate rise. Yet the old lesson remains: speculation often grows where local rules are tight, and no fence can fully substitute for sound economic footing. The coming weeks will reveal whether these measures steady the ground or merely slow the slide.
On Sunday, South Korea's finance ministry announced it would tighten oversight of offshore currency derivatives, and it was one piece of a wider movement sweeping across Asia. Currencies have been buckling under high oil prices, money fleeing local markets, and a strong dollar, and central banks are now focusing on trades conducted far beyond their borders.
Each country has chosen its own tools. The Philippines asked banks to ensure non-deliverable forward contracts serve only economic purposes, India cut the net open position limit for banks to $100 million, and Indonesia raised rates without warning on Tuesday while promising to defend the rupiah around the clock.
The strain is plain in the numbers. The rupiah has crossed 18,000 per dollar, the won has fallen to its weakest since the financial crisis, and the rupee and peso have both hit record lows. Non-deliverable forwards, cash-settled contracts that let investors bet on currencies outside home markets, can move prices at home even when they trade in Singapore, London or New York.
The defense has its contradictions. Traders say the Reserve Bank of India has been selling dollars, and Bank Indonesia has done the same overseas, draining regional reserves in the process. Some observers argue the real trouble is homegrown: record foreign withdrawals from Indian stocks, investor unease over Indonesia's fiscal direction, renewed inflation in the Philippines, and heavy outflows from South Korea's market despite a recent AI-driven rally.
Analysts remain doubtful that the curbs can turn the tide alone. Economists at MUFG and OCBC see the steps as a way to soften sharp moves, but expect that lasting relief will require stronger fundamentals and possibly further rate hikes. The next chapter depends on whether those hikes arrive and how long the dollar sales can continue.
On Sunday, South Korea's finance ministry said it would step up its oversight of offshore currency derivatives. It was one move in a region-wide effort. Across Asia, central banks are turning their attention to trading that happens beyond their borders, as currencies buckle under high oil prices, money leaving local markets and a strong dollar.
The measures differ by country. The Philippines has asked banks to make sure non-deliverable forward contracts are used only for economic purposes. India has tightened the limit on banks' net open position to $100 million. Indonesia raised interest rates unexpectedly on Tuesday, and its central bank says it is active in currency markets "around the world, around the clock" to support the rupiah.
The pressure is visible in the levels. The rupiah has broken through the closely watched 18,000-per-dollar mark. The Korean won has dropped to its weakest since the global financial crisis. The Indian rupee and the Philippine peso have both hit record lows. The oil-price shock from the US-Iran conflict has made things worse, striking the region's energy-importing economies.
Non-deliverable forwards are cash-settled derivatives that let investors hedge or speculate on currencies outside local markets. Deutsche Bank puts them at about 4% of the $10 trillion-a-day global FX market. In Asia, where convertibility restrictions are common, their weight is larger, so trading run from Singapore, London or New York can move prices at home.
Regulators have tried to dilute that influence before. India let local banks join the NDF market in 2020 and has since tried to draw activity onshore to GIFT City. South Korea opened its forex market to overseas investors and extended trading hours. Thailand lets non-resident corporates tap onshore baht liquidity and hedge freely. Khoon Goh of ANZ says NDFs exist because of onshore restrictions; ease them, provide enough liquidity, and the need fades, as it did for the Singapore dollar and the Thai baht.
The war-driven stress has nonetheless pushed some central banks into the very markets they have been warning about. Traders say the Reserve Bank of India has been selling dollars, mostly in shorter maturities, and its short dollar book, which includes offshore derivative positions, has likely swollen to around $115 billion. Bank Indonesia has also sold dollars overseas. The defense has contributed to falling foreign-exchange reserves in the region. It has helped limit spillovers from offshore to local markets, and the RBI has often been seen stepping in just before the onshore open.
Some investors argue the weakness comes from home-grown problems rather than offshore trading. Global funds have pulled a record $30 billion from Indian stocks this year, prompting recent efforts to attract overseas capital. In Indonesia, investors are wary of the economic outlook and the fiscal path under President Prabowo Subianto. The Philippines faces a renewed inflation shock from oil. South Korea has seen more than $78 billion of net foreign investment leave its stock market so far in 2026, even after a rally to record highs earlier this month driven by a retail craze for AI stocks.
Analysts doubt the curbs can turn things around alone. Michael Wan of MUFG Bank said they may have some impact, but fundamentals also need to shift for the measures to succeed. Lavanya Venkateswaran of OCBC sees the steps as aimed at blunting sharper moves, and still expects rate hikes in India, the Philippines and Indonesia. Whether those follow, and how long intervention keeps draining reserves, is what to watch.
Bemerkenswerte Zitate
It may have some impact, but ultimately for the measure to be successful there needs to be a shift in the fundamentals as well.— Michael Wan, senior currency analyst, MUFG Bank
The reason the NDF market exists is due to restrictions in the onshore market.— Khoon Goh, head of Asia research, ANZ
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