Asia FX Talk · Jackson Hole revives high-for-longer Fed risks for regional FX

Key arguments

• Fed Chair Warsh's speech at Jackson Hole signaled that inflation is still insufficiently contained, reaffirming the 2% target and arguing that financial conditions are not restrictive.
• Markets now price a 58% probability of a September rate hike and about 1.5 hikes by year-end, leading to higher US short-term yields and a stronger dollar.
• THB and IDR are particularly exposed to rising US rate expectations due to limited yield support (Thailand) and monitoring of domestic political risks (Indonesia).
• SGD and MYR remain more resilient due to stronger external positions and policy credibility.

Corresponding source evidence

1. While stopping short of explicitly backing a September rate hike, Warsh stressed that inflation remains insufficiently contained, reaffirmed the Fed's commitment to its 2% target, and argued that current financial conditions are not restrictive.
2. For Asia FX, the key implication is that the market narrative has likely shifted toward whether inflation remains sticky enough to warrant policy tightening.
3. While recent dollar weakness had provided support for Asia FX broadly, Friday's market reaction suggests that several regional currencies could face a tougher backdrop this week if front-end US yield increases prove persistent. · this week