MUFG said the week ahead in Asia will be driven by geopolitics, inflation, and central bank decisions. Different policy paths will likely move regional currencies in different directions. MUFG expects the Bank of Korea to keep rates unchanged. MUFG also expects the Bank of Korea to signal a long pause through 2026. It cites rising home prices and a volatile won as key reasons. MUFG added that the Bank could upgrade its growth forecasts at the meeting.

Bank Of Korea Outlook

MUFG expects the Bank of Thailand to cut rates by 25 bps. It points to negative inflation and a weak growth outlook. It also noted that recent election results have improved policy clarity. MUFG expects China’s loan prime rates to remain unchanged. It says clearer guidance may come after the National Party Congress, the Two Sessions, and the full 15th Five-Year Plan in March. MUFG also said Australia’s January CPI will test conditions after the Reserve Bank’s recent rate rise. Inflation is expected to cool, but stay above target. This supports a hawkish tilt even if policy remains on hold. The article was produced with the help of an AI tool and reviewed by an editor. We expect the Bank of Korea to keep its policy rate unchanged through 2026. Seoul apartment prices are still rising, up 1.5% last month. The won also remains volatile, with one-month implied volatility near 11%. This supports a long pause. It may also favor derivative strategies that assume a range-bound or stronger KRW, such as selling won puts against currencies where central banks are easing.

Bank Of Thailand And China Implications

By contrast, we expect the Bank of Thailand to cut its rate by 25 basis points soon due to mounting pressure on the economy. Inflation has been negative for four straight months and was -0.4% in January. Q4 2025 growth was also weak at 1.2%. A cut therefore looks very likely. This supports using forwards or options to position for further Thai baht weakness versus regional peers. In China, we expect loan prime rates to stay unchanged for now. January industrial output and retail sales did not signal an urgent need for a policy move. More meaningful direction may be delayed until the National Party Congress in March. This waiting period may offer a chance to set up low-cost yuan volatility trades, such as long straddles, in case of a bigger move next month. Australia’s January CPI report will be a key test, especially after the Reserve Bank’s surprise rate hike in late 2025. We expect inflation to ease slightly to around 4.2%, but that is still well above the target. This should keep the central bank leaning hawkish. Derivatives traders may therefore keep a bias toward AUD strength, especially against more dovish currencies like the Thai baht. Create your live VT Markets account and start trading now.

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