Two pressures are hitting Asian currencies at once. Front-month Brent crude is trading above US$100 a barrel because of the conflict involving Iran, according to Trading Economics. The yield on the 10-year US Treasury reached 5.23% on 25 September, its highest since 2007, Fortune reported.

That combination has prompted comparisons with the 1997 Asian financial crisis. This article does not predict a crisis. It sets out the indicators economists use to judge vulnerability and shows where each major economy stands on them.

Not a region-wide sell-off

The dollar is not strong against every Asian currency. Data compiled by the Asian Development Bank for 28 September show a clear split (ADB Daily Market Watch):

Currency Per US$ Change since start of 2026
Indonesian rupiah 17,885 −6.8%
Philippine peso 62.76 −6.3%
Indian rupee 95.89 −6.2%
Thai baht 33.36 −5.6%
Japanese yen 158.10 −1.3%
Malaysian ringgit 4.07 −0.4%
Chinese yuan 6.71 +4.1%
Korean won 1,358 +5.9%

A negative change means the currency has weakened against the dollar. The weakest currencies belong mostly to oil importers running current-account deficits. Economies with large surpluses, such as South Korea and China, have strengthened.

The indicators that matter

Currency crises tend to start when a country needs more foreign currency than it earns or holds. Four indicators help measure that risk:

  1. Current-account balance. A deficit means the economy relies on foreign capital inflows to fund itself.
  2. Reserves against short-term external debt. Reserves are what a central bank can use to meet foreign-currency obligations due within a year.
  3. Inflation. High inflation erodes confidence in the currency and limits room to cut interest rates.
  4. Credit-rating outlooks. A negative outlook signals that agencies see the balance of risks worsening.

Where the major economies stand

Economy Current account Buffer Inflation Rating signal
Philippines Deficit of 6.4% of GDP in H1 Reserves US$104.8bn 6.1% (Aug) Fitch outlook negative (Apr)
Indonesia Deficit of 3.3% of GDP in Q2, a record Reserves US$146.5bn; about 1.8x short-term external debt 3.19% (Aug) Moody's and Fitch outlooks negative; S&P stable
India Deficit of 0.5% of GDP (Apr–Jun) Reserves US$765.9bn 4.82% (Aug) No 2026 change found
Thailand Not confirmed Reserves 2.8x short-term debt 2.53% (Aug) Fitch outlook raised to stable (Sep)
South Korea Large surplus Reserves US$442.3bn, after a record monthly rise 3.1% (Aug) No change found

Sources: Manila Times, Tribune, Al Jazeera, BusinessWorld, Trading Economics, ANTARA, Xinhua, Business Standard, The Nation, Seoul Economic Daily, Seoul Economic Daily. The Indonesian reserve-cover ratio is an NDNews calculation: end-August reserves against short-term external debt by original maturity at the end of Q2. Measured by debt falling due within a year, cover would be lower.

The Philippines has the widest external gap among the larger economies. The peso hit a record low of 62.71 per dollar on 4 September, and Bangko Sentral ng Pilipinas has raised its policy rate three times this year, to 5.00%.

Indonesia has used several tools. Bank Indonesia raised the BI-Rate by a total of 100 basis points between May and June to 5.75% and held it on 23 September. It has also stepped up intervention in offshore and domestic currency markets, raised rates on its own SRBI securities and lowered the limit on cash dollar purchases without an underlying transaction to US$25,000 per person a month, according to its May statement. Reserves still cover about 5.4 months of imports. For what the hikes mean for households, see our explainer on BI's rate rises and mortgages.

India has large reserves, but it is drawing on them. Reserves fell by US$14.9 billion in the week to 18 September, the sharpest weekly drop since November 2024. About US$10.9 billion of that was dollar sales by the central bank to steady the rupee; the rest reflected revaluation losses.

Japan is a different case. It is a creditor nation. Its Ministry of Finance nonetheless spent ¥15.4 trillion on intervention between 30 July and 26 August to support the yen (MOF).

Smaller economies with thin buffers

Some smaller economies have far less room to absorb a shock:

  • Pakistan's central bank reserves reached a record US$21.4 billion, but that still covers only about 3.5 months of imports (TechJuice). The country is under an IMF programme, and Moody's upgraded its rating in August.
  • Sri Lanka raised its policy rate by 100 basis points in May. On 23 September, IMF staff ended a visit without agreement on the next review of its programme; talks are continuing (IMF).
  • Laos faces heavy debt-service costs, which the World Bank puts at about 13% of GDP in 2026 (World Bank).

1997 versus 2026

In 1997, several currencies were pegged to or closely tracked the dollar. That encouraged heavy short-term foreign borrowing, and central banks used up reserves defending the pegs (Federal Reserve History). A 1998 Reserve Bank of Australia study sets out the figures (RBA):

Indicator 1996–97 2026
Exchange rates Pegged or closely managed Mostly floating
Short-term debt as a multiple of reserves, Indonesia 1.6x (June 1997) About 0.55x
Short-term debt as a multiple of reserves, Thailand 1.1x (June 1997) About 0.36x
Current account, Thailand −8.0% of GDP (1996) Not confirmed for 2026
Current account, Indonesia −3.8% of GDP (1996) −3.3% of GDP (Q2 2026)
Current account, Philippines −4.5% of GDP (1996) −6.4% of GDP (H1 2026)

The 2026 debt ratios are NDNews conversions of the reserve-cover figures above, so a figure below 1 means reserves exceed short-term debt. The contrast is clear on reserves and exchange rates: most buffers are much stronger than in 1997. The exception is the current account. In the Philippines and Indonesia, recent deficits are close to, or above, their 1996 levels. The comparison is imperfect: the 1996 figures cover a full year, while the 2026 figures cover a half-year and a single record quarter.

What the institutions say

The IMF's July World Economic Outlook update warned of possible "capital outflows and abrupt asset repricing in emerging markets with weaker fundamentals." It said exchange rates should generally remain "the preferred option" for absorbing shocks in countries with inflation targets. Temporary intervention or targeted capital-flow measures may complement policy where markets become "disorderly" (IMF).

The ADB raised its forecast for developing Asia's growth this year by 0.1 percentage point, to 5.0%. It lists a broader Middle East conflict and tighter financial conditions among the main risks (ADB).

What to watch

  1. Oil and the Strait of Hormuz. A lasting drop in oil prices would ease pressure on importers faster than any policy move.
  2. US Treasury yields. A rise in yields tends to draw capital out of emerging markets.
  3. Monthly reserve data. Watch Indonesia, India and the Philippines for signs that intervention is draining reserves.
  4. Rating actions. Moody's and Fitch both have Indonesia on negative outlook.
  5. Central bank meetings in October. Track these on our APAC central bank rates tracker.

This article was researched with AI assistance and reviewed by the NDNews editorial team. It is based on published data as of 29 September 2026 and describes vulnerability indicators, not a forecast of a crisis. It is not investment advice.