Analysts from MUFG, including Lin Li, Michael Wan, Lloyd Chan, and Khang Sek Lee, have identified a week focused on Asia’s geopolitical developments, inflation rates, and monetary policy decisions as key drivers for regional currencies. They anticipate that the Bank of Korea will maintain its current interest rates through 2026, while the Bank of Thailand may reduce rates by 25 basis points. Meanwhile, China's loan prime rates are expected to remain steady until clearer policy directions emerge in March.
"The upcoming week is distinctly centered on Asia, with an emphasis on geopolitical factors, inflation trends, and monetary policy," the analysts noted. "Specifically, we predict that the Bank of Korea will hold its rates steady, likely signaling an extended period without change until 2026. This decision is influenced by rising property prices and the volatility of the won, with potential upgrades to BOK's growth projections during their meeting."
"In contrast, the Bank of Thailand is projected to cut interest rates by 25 basis points due to negative inflation trends and a generally weak growth outlook, despite some improved clarity from recent election outcomes," the analysts added.
Regarding China, the expectation is for its loan prime rates to remain unchanged. However, clearer insights into China's monetary policy might emerge after significant political events such as the National Party Congress, Two Sessions, and the release of the comprehensive 15th Five-Year Plan in March.
Additionally, Australia's inflation data for January will serve as a crucial indicator following the Reserve Bank's latest rate increase. Inflation is predicted to decrease but remain above target levels, suggesting a hawkish stance while keeping monetary policy stable.